Trump’s liberation day cometh

Wednesday, 2 April 2025

Kid Rock holds a signed executive order regarding ticket scalping after President Donald Trump signed it in the Oval Office of the White House in Washington, Monday, March 31, 2025.

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ANALYSIS: Liberation day is on the way.

This is the name that US President Donald Trump has given to April 2, where he will be making a flashy announcement (on Thursday, NZT) dropping tariffs on a bunch of the countries his administration thinks have been ripping the United States off. It will, he said, amount to a “re-birth of a country” and that they will apply to all countries the US trades with.

“We’re going to be very nice, relatively speaking, we’re going to be very kind,” he said in the Oval Office on Monday NZT.

No one knows what will be in the announcement, which countries will actually end up being covered by what tariffs and what levels those tariffs might be.

Will an agricultural one apply to New Zealand goods? Or one that catches other goods and services? Officials are quietly hopeful that will not be the case. But no one really knows.

Trump has repeatedly called April 2 “Liberation Day,” with promises to roll out a set of tariffs, or taxes on imports from other countries, that he says will free the U.S. from a reliance on foreign goods.

Prime Minister Christopher Luxon has consistently said the Government is putting New Zealand’s case to the US and that social media posts and comments from the US president do not amount to policy.

Trade Minister Todd McClay said that New Zealand ministers and officials had been engaging with the US about it, but summed up liberation day pretty well saying that he had “no greater clarity other than what you and I are reading in the papers around the world”.

“We'll know Thursday morning exactly what the US administration has in store.”

New Zealand has been very careful to consistently point out that the trade relationship with the United States is “balanced”. I.e. exports and imports between the two countries roughly equal the same amount.

Trade Minister Todd McClay says we will know on Thursday what the US Administration hs in store.

According to the office of the US Trade Representative, two-way goods trade was $US10.1 billion in 2024 ($17.6b), with a small trade deficit of $US1.1 billion. The US imported $US5.6 billion from New Zealand, while New Zealand imported $US4.5 billion in goods from the US. These will likely be the numbers used by the US system and the trade deficit, it noted, has been going down.

The prime minister said he trusted the US president, and that New Zealand worked well with the American administration.

Longstanding gripes from the US side towards New Zealand have been about NZ not importing certain pork products and around pharmaceuticals (that relates to government drug-buyer Pharmac).

The Australians - who have a free trade deal with the US - are reportedly also most concerned about pharmaceuticals (which they purchase through a Government agency similar to Pharmac) and beef.

And as Trump has demonstrated with tariffs on Mexico and Canada which he imposed only a few years after signing a new trade deal with those countries, (The United States-Mexico-Canada Agreement), how much protection having a free trade deal with the US offers remains to be seen under this capricious administration.

One thing does appear clear. Up to now, Trump has mostly used tariffs as a way to try to squeeze non-trade concessions out of other countries. But in amongst his confused and inconsistent reasoning for various tariffs, Trump appears, and has for decades appeared to believe, that trade deficits amount to the US losing and is favourable towards mercantilist economic policies.

Mercantilism is broadly the view that trade generates wealth through the accumulation of positive trade balances achieved through protectionist policies.

Trump has also said in various forums that tariffs will help to make the US rich. In reality, however, tariffs are a tax on defined goods and services imported into the US. Either the tax is paid and all manner of goods become more expensive, or firms decide to set up manufacturing in the US to avoid the tariffs, which will produce more expensive goods.

Either way it is a tax where the importer pays the tariff to the Government, but the cost is borne by consumers. And it isn’t just finished goods, it could apply to any number of inputs into finished goods.

Because it is all so highly speculative - as is whether any announced tariffs will be persisted with - markets are struggling to price in the risk.

This is a substantial reason why global markets have been roiled by the prospect of these upcoming tariffs. The Dow just briefly hit its lowest point in the past six months. The ASX had its worst day since Covid-19 on Monday. The NZX S&P50 has been on a mostly downward trend since the start of the year.

Just what the US president has in store in anyone’s guess. But if the tariffs are big and wide-ranging expect markets to react negatively as the future trajectory of global trade with the US is thrown into doubt.

In New Zealand, it’s a case of watch, wait and hopefully be left off someone’s list.