Luxon warns of ‘trade war’ causing global headwinds after Trump ‘Liberation Day’ tariffs

Thursday, 3 April 2025

Prime Minister Christopher Luxon has warned of a “trade war” causing global headwinds, as US President Donald Trump imposes an additional 10% tariff on all countries’ trade - including New Zealand’s - amid a sweeping reciprocal tariff regime.

“Let's be clear, tariffs in a trade war is not good for global economics,” Luxon said, from Christchurch on Thursday afternoon.

“It means that there's about $900 million worth of tariff being levelled at New Zealand exporters, and that will be passed on to US consumers, sadly, and that's why tariffs are not the way to go, because it ends up driving higher prices for US consumers.”

Luxon said while the tariffs were “not ideal”, the US market would remain a level playing field for New Zealand products and there remained “good connections” with the Trump administration.

The “bigger worry” was the global impact, as Trump imposes higher tariff rates on major economies in Asia, Europe, and elsewhere.

“We don't believe that tariffs and trade wars is the way that we should be doing global trade. We don't think that's good for New Zealand, but frankly, it's not good for the world. And that's why we'll continue to advocate against tariffs,” he said.

Earlier on Thursday, a sombre Trade Minister Todd McClay said he was seeking further detail about the tariffs, announced by Trump at the White House event after months of unease about the economic implications of his aggressive trade policies.

McClay ruled out retaliation, saying nimble and competitive New Zealand exporters, who export $9 billion worth of goods to the US, have survived the worst of Trump’s higher “discounted” reciprocal tariffs on many of its closest allies, which have disrupted 80 years of global trade liberalisation.

McClay said it would be US consumers who would bear the brunt of the $900m in tariffs Kiwi exporters are on the hook for, from this evening.

McClay spoke to media after Trump’s lengthy White House speech on Thursday morning, where Trump declared it “one of the most important days, in my opinion, in American history … [a] declaration of economic independence”, saying the United States had for decades “been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike”.

Economic independence v economic self harm

Following months of speculation and unease, the preliminary details of Trump’s tariff plan show the new baseline 10% tariff coming into effect on 5.01pm Thursday, NZ Time. The higher reciprocal tariffs for other nations - which do not appear to apply to New Zealand - come into force April 10.

The White House has described the 10% as an “additional ad valorem duty on all imports from all trading partners”.

The broad consensus among economic experts is that tariffs will effectively be a tax on the American economy, raising prices. The tariffs could spark a broader trade war as countries retaliate in turn, or seek to negotiate lower tariffs. It could also curb global growth.

Australian prime minister Anthony Albanese has remarked they are not the actions of a “friend” and were an act of “economic self-harm”. Australia’s meat exports were highlighted in Trump’s speech.

McClay: Broad repercussions likely, but NZ not worst off

McClay said he was seeking further clarification and advice, and Cabinet would further consider the issue on Monday.

“Trade wars and tariff rates are not good for the world’s economy, and they’re certainly not good for New Zealand exporters,” he said.

“While this is not unexpected, it is something that will have an impact upon New Zealand exports. But it is important to note that there are many other countries around the world that are facing much higher tariff rates than New Zealand exporters will be.”

McClay said he was taking time to get more detail - including clarifying whether the 10% was a blanket imposition or on top of current tariffs, McClay thought the former although the White House has described it as “additional”.

He said the US had signalled it believed its trade relationship with New Zealand was “balanced”.

McClay said the tariffs would likely be worn “by US consumers not New Zealand exports”.

“Tariffs in themselves are not good for trade. This is likely to have an impact upon not just on international trade, but also upon inflation, demand, and at the same time some currency rates. But we’ll be working very closely with our exporters during the course of today … to get as much information as we can.”

More broadly, other countries facing a higher tariff regime would likely have an impact on demand and inflation, which would also impact New Zealand, he said.

Winston Peters: ‘Mission achieved’

Deputy prime minister and Foreign Minister Winston Peters has claimed success on social media, having last month travelled to Washington DC ahead of the tariff announcement, where he met with secretary of state Marco Rubio.

“We went to Washington DC to get the best possible result for New Zealand in the circumstances, by making strong, genuine, in-person connections with the US Administration,” Peters posted on X.

“The purpose of our mission has been achieved. Indeed, New Zealand companies, who were fearing much worse.”

That was disputed by Labour’s trade spokesperson Damien O’Connor, who said, “the Government’s strategy of keeping its head down has not given New Zealand any advantage over our competitors.”

“It’s disappointing that the Government hasn’t been able to negotiate lower tariffs given the very low level of tariffs we impose on goods and services from the US.”

He said there was uncertainty over how much New Zealand exporters would carry that cost, and New Zealand would have to consider the “ripple effect” from trading partners like China.

“Decisions by our competitors to shift their goods to other markets may have further ramifications for NZ exporters.”

Trump details tariffs in White House speech

Trump’s reciprocal tariffs regime appears to mean New Zealand escapes more severe trade sanction. New Zealand has comparatively few tariffs on US imports, while paying a greater sum to access the US market of 340 million people.

Standing in the White House’s Rose Garden, the US President held up a chart of the United States’ largest trade partners, listing the combined tariff rate and the charge the US would impose in return. The US would charge 34% on Chinese imports, 20% on EU imports, 25% on South Korean imports, 24% on Japanese imports and 32% on Taiwanese.

The list ranked New Zealand's tariff on US goods as 20%, indicating the White House may have included GST - a domestic consumption tax - in this tally. Trump criticised such value-added taxes, which experts do not consider to be a tariffs, as 'exorbitant'. Trade Minister Todd McClay said New Zealand's average tariff charge was closer to 1.9%.

Trump said the US was targeting countries that had, while the US lowered tariff barriers, “placed massive tariffs on our products and created outrageous non monetary barriers to decimate our industries”.

“For nations that treat us badly, we will calculate the combined rate of all their tariffs, non monetary barriers and other forms of cheating.

“Because we’re kind … we will charge them approximately half of what they are, and have been charging us so the tariffs will not be a full reciprocal I could have done that, yes, but it would have been tough for a lot of countries.”

Among specific tariff barriers, Trump specifically mentioned Thailand, India, and Vietnam as charging a 60% or higher tariff on American-made motorcycles, while the US had a 2.5% on foreign-made automobiles.

“In many cases, the friend is worse than the foe.”

He said the US would impose a 25% tariff on all foreign automobiles.

Agriculture exports criticised

Trump said tariff rates imposed by other countries was “not fair to our farmers”. He spoke of Australian beef exports, and similarly suggested reciprocal tariffs would be imposed.

Trump highlighted Australian beef exports as requiring retaliation, yet Australia also received a 10%. No specific agricultural tariffs were imposed by his executive order.

“We imported $3 billion of Australian beef from them just last year alone. They won't take any of our beef. They don't want it because they don't want it to affect their farmers. And you know what, I don't blame them, but we're doing the same thing. Right now, starting out, midnight tonight, I would say.”

The United States is New Zealand’s largest market for red meat exports, which reached $2.8b in the year to December, rising 18.8% on the year earlier.