|How the Trade War Affects NZ
As the US-China trade war continues to
intensify, New Zealand is left wondering how it will be affected. As the first
member of the Organization for Economic Cooperation and Development (OECD) to
sign a free-trade agreement with China in 2008, New Zealand has become somewhat
dependent on the Asian giant. From dairy and agricultural products through to
timber and tourism, roughly 20% of New Zealand's exports head to China.
The United States recently announced new
15% tariffs on US$112 billion of Chinese goods, with China starting to impose
5% and 10% tariffs on another US$75 billion worth of US goods. Two-thirds of US
consumer goods imported from China are now subject to tariffs, with all Chinese
goods set to be subject to tariffs by the end of 2019. The uncertain and
ever-changing nature of the trade war is having a significant effect on global
markets, with domestic consumer confidence and jobs figures also taking a hit
in the United States.
According to leading economist Cameron
Bagrie, it's a not a question of "if" New Zealand will be affected by
this escalating trade war, but "when". Export numbers for July were
already down 6% on the previous year, with renewed tariffs over recent weeks
only likely to make the situation worse. Along with the acute impacts being
felt in agricultural and tourism sectors, weakening global trade conditions
will also have a huge effect on the small New Zealand economy.
In a recent interview with Nikkei, New
Zealand Finance Minister Grant Robertson said: "We are a small country of
5 million people... And New Zealand is a small, open economy and we rely on
what happens in the rest of the world." Along with specific exports and
tourism numbers declining, the trade war continues to adversely affect global
trade patterns. While no-one is immune to global trading system distortions,
small economies like New Zealand often have less insulation from the storm.
According to Bagrie, the trade war is one
of the main reasons New Zealand airlines started lowering inbound prices, with
tourism numbers likely to start dropping from 2020 unless a resolution is
found. Consumers and business owners in some sectors are already feeling the
pressure, with a drop in the latest ANZ Business Confidence Outlook Survey
recorded and more companies expecting to cut jobs over recent months. While the
spill-over is not likely to threaten New Zealand's core strength, it does
highlight a growing need to diversify trade partners.
The Regional Comprehensive Economic
Partnership is currently under negotiation, with this new 16 country pact
hoping to be underway by the end of the year. According to Robertson,
"It's clearly got lots of challenges but we continue to be committed to
trying to make it work." The New Zealand economy is expected to grow by
2.4% this financial year, which is a reduction from the 3.2% recorded the year
before. It's not all about growth, however, with the new "Wellbeing
Budget" set to focus on broad social issues like mental health and child
welfare in order to broaden the definition of New Zealand's success.