The PM says he’ll work with whoever wins the White House, but the trade minister has previously expressed concern over higher tariffs, writes Stewart Sowman-Lund for The Bulletin.
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A busy minister
Todd McClay was the man of the moment at yesterday’s post-cabinet press conference, despite the scheduled announcement being about education. The trade minister earned a special mention from the prime minister, who congratulated him on successfully ending trade talks with the wealthy Gulf Co-operation Council, before finding time to launch a new charter for hunting and fishing and then jetting off to China this week.
McClay, reportd BusinessDesk’s Riley Kennedy (paywalled), will have visited 30 countries by the end of the year. He’s currently leading a business delegation to Shanghai to attend an international import expo and says it’s about flying the flag for New Zealand. That’s been the ongoing message since the coalition government took office, with Christopher Luxon telling an audience in Auckland last month that he had spent “much of this year on the road [overseas] making the case for New Zealand as a destination for capital investment and as a trusted partner for security and trade”.
What could the US election change
The big unknown in the talk of trade could become a little less murky as soon as tomorrow night when the outcome of the US presidential election might be known.
A Donald Trump win could see tariffs raised on imports, potentially by 20%. While Christopher Luxon has opted to remain pretty agnostic on what a second Trump term could mean for New Zealand, McClay has previously expressed concern over the tariff threat. He told Farmer’s Weekly earlier in the year that the proposal would be “very harmful”, describing tariffs as “very blunt” and not necessarily good for a domestic economy due to the possibility of increased living costs. “In many cases it lessens choice and puts prices up for consumers,” McClay said.
The Economist (paywalled) claimed that Trump’s “vision for tariffs… would turn the clock back nearly a century on economic strategy”, while Waikato University’s Alexander Gillespie told the Waikato Times that, without a free trade deal with the US, New Zealand risked being “thrown around like a buoy in a storm”. But Newsroom’s Jonathan Milne, reporting on a new paper by the NZ Institute of Economic Research, said that a Kamala Harris presidency could also result in increased tariffs and a tougher trade environment. The Biden administration added tariffs on top of those implemented by Trump, with the institute saying: “The chances of a Democrat/Harris administration doubling down and increasing tariffs are high.” Either way, the next days and weeks are going to be nerve-wracking for those with skin in the game.
Luxon hedging his bets
In an interview with RNZ’s Guyon Espiner yesterday, Luxon said he would be able to work with whatever leader the United States chooses this week. Asked specifically if he could work with Trump, Luxon added: “I’ll find a way”. At his post-cabinet press conference, reported the Herald’s Claire Trevett, Luxon wouldn’t comment directly on Trump’s threat of higher tariffs, though acknowledged there was little chance either way of securing a free trade deal with the United States. “I appreciate there’s a lot of policies being proposed by both candidates … my commitment is we will work very positively with whoever the American people choose.” An earlier visit to the US this year saw Luxon meet with Democrat and Republican representatives in anticipation of what is expected to be a tight election.
One person far more willing to stake their claim was former US ambassador Mark Gilbert who told Stuff’s Samantha Hayes that a Trump presidency would be a disaster for New Zealand economically. “Every single business he has ever started other than the Trump Organisation is out of business. He’s bankrupt six companies. He cost investors billions of dollars.”
The better news for exporters
There has been some good news for exporters in recent days. The Gulf deal is big news and came somewhat out of the blue before the weekend. It followed quickly on from a deal with the United Arab Emirates. It’s been 18 years since talks first started with the Gulf nations (Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman and Bahrain) and, as noted by BusinessDesk’s Dileepa Fonseka (paywalled), 15 years since a deal was first announced. From day one, the deal will result in tariff-free exports to the region and within a decade that will grow to 99%.
It’s no surprise, then, why Luxon acknowledged the deal in his opening remarks last night, and why McClay has been doing the media rounds. In an interview with Newsroom’s Sam Sachdeva, McClay described it as the “highest quality deal” ever signed off by the six nations in the Gulf Cooperation Council. It’s the first, he said, with a major agricultural exporter. “Over the next 10 years, can we double trade with them? Absolutely.”