US President Donald Trump’s tariff policy is changing by the day, as international investment markets experience unprecedented volatility.
It all started last week in the White House Rose Garden, when the President revealed his tariff plan to address US trade imbalances and protect American economic interests.
The tariff rates reflected a combination of economic, political, and strategic objectives, with the specific methodology based on trade deficits.
The basic tariff for a country was calculated as one half of the ratio of the US trade deficit with a country, to that country’s exports to the US.
For New Zealand, since the US only exported $4.5 billion worth of goods to us in 2024, while we exported $5.6 billion worth of goods to them, the US trade deficit was $1.1 billion. So, our tariff was calculated as one half of the ratio of $1.1 billion to $5.6 billion [1/2x($1.1/$5.6)=0.098] or 9.8 percent – resulting in the minimum rate of 10 percent.
Countries with the largest trade imbalances were hit with the highest tariffs, which ranged up to 49 percent.
There were a number of special cases including for countries where penalty tariffs were being applied because of their involvement with illegal drug supply chains, as well as exclusions for goods like aluminium and steel, which already had tariffs applied during the President’s first term.
Goods deemed critical to the US were exempted from the new regime, including pharmaceuticals, lumber articles, and minerals sourced from a range of countries including New Zealand.
So how will the tariff changes affect New Zealand?
This week’s NZCPR Guest Commentator, Economics Professor Niven Winchester of Auckland University of Technology analysed the likely impact of the tariff rates announced by the President:
“To estimate the impacts of this tit-for-tat trade standoff, I use a global model of the production, trade and consumption of goods and services. Similar simulation tools – known as ‘computable general equilibrium models’ – are widely used by governments, academics and consultancies to evaluate policy changes.
“Some nations gain from the trade war. Typically, these face relatively low US tariffs – and consequently also impose relatively low tariffs on US goods. New Zealand (0.29 percent) and Brazil (0.28 percent) experience the largest increases in GDP. New Zealand households are better off by US$397 per year.”
Auckland University’s Professor Robert MacCulloch suggests one of the reasons New Zealand could see a rise in GDP per capita of around NZ$700 per person is that, facing higher prices “demand from US consumers will drop. To the extent overseas producers try to increase sales by selling more into markets like New Zealand, we will become spoilt for choice and pay lower prices.”
In his address, President Trump explained the reasoning behind his tariff policy:
“I, Donald J Trump, President of the United States of America, find that underlying conditions, including a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and US trading partners’ economic policies that suppress domestic wages and consumption, as indicated by large and persistent annual US goods trade deficits, constitute an unusual and extraordinary threat to the national security and economy of the United States. I hereby declare a national emergency with respect to this threat.”
He explained that in January he had asked his administration to investigate the cause of the country’s large trade deficits and report on the economic and national security implications.
They found, “Large and persistent annual US goods trade deficits have led to the hollowing out of our manufacturing base; inhibited our ability to scale advanced domestic manufacturing capacity; undermined critical supply chains; and rendered our defense-industrial base dependent on foreign adversaries.”
In other words, instead of trade deals with the US being reciprocal, with each country importing and exporting around the same value of goods, the US imports far more than they export. This has severely undermined their manufacturing base, resulting in fewer jobs and a less resilient and independent country.
The President said he wanted to re-establish reciprocity in trade to enable the US to strengthen its economic base and rebuild a security umbrella for citizens and allies.
His ultimate goal is to use tariffs to switch the US from taxing labour to taxing imports, using the funds collected to lower income tax towards zero for most Americans.
Tariffs have played a big part in American history. It’s how the US government funded itself in the early years. One of the first laws ever passed by the Congress was the Tariff Act of 1789, which imposed a five percent tax on most imports. For over a century, tariffs provided over 90 percent of the federal government’s revenues, and for the next 50 years, they provided around half.
It wasn’t until Congress introduced income tax in 1913 that tariffs began to decline. During the Great Depression rates peaked at nearly 60 percent, but over recent years they have dropped to around 4 percent. Last year tariffs accounted for just 1.5 percent of the total US tax revenue.
During his announcement, President Trump warned that retaliatory actions by trading partners would trigger reprisals – but he also explained that if countries sought to remedy the trade imbalance, an adjustment could be considered: “Should any trading partner take significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the United States on economic and national security matters, I may further decrease the duties imposed under this order.”
And that’s what’s happened. With more than 75 countries approaching the administration to remedy their trade imbalances, the President has now announced a 90-day pause during which tariff rates have been reduced to a blanket 10 percent – except for those countries that retaliated.
Whether rates will stay at 10 percent in the long term, or go higher, remains to be seen.
The scale and speed of President Trump’s reforms is breathtaking.
He’s able to move at pace because he has control of the US Government. That window may close in two years’ time when Congress holds its mid-term elections for all 435 seats in the House of Representatives and a third of the 100 seat six-year-term Senate.
With no guarantee that the Republicans will continue to hold a majority, the President knows there is no time to waste in pushing ahead with his reforms.
In comparison, the three-year term of New Zealand’s Parliament gives our Governments the opportunity to dither!
And that’s what the Coalition appears to be doing according to former ACT Leader Richard Prebble, who explained in a recent Herald article why he opposes ACT’s proposal to extend the term of Parliament from three years to four:
“Parkinson’s law, that work expands to fit the time available, is true for Government. Give politicians another year and they will take longer to do the same amount of work. The knowledge that the Government must account to the electorate in three years is a huge incentive to make decisions…
“In this year’s Budget, the media reports the Finance Minister will have a ‘bonfire of vanity projects’. Her Budget last year must have funded these vanity projects. The minister has ruled out abolishing any of New Zealand’s 32 departments, ministries and agencies. The way to permanently reduce spending is to abolish the agencies that are themselves vanity projects…
“The Prime Minister has sternly demanded local government stick to the basics. It is advice that he should also apply to central Government. A three-year term has failed to motivate the Coalition into making timely decisions that it knows are necessary. Having another year would just result in more procrastination.”
The law change enabling a four-year term of Parliament was part of ACT’s Coalition Agreement. Both National and New Zealand First have agreed to support the Bill to a Select Committee.
Submissions on the Term of Parliament (Enabling 4-year Term) Legislation Amendment Bill close at 1pm on April 17 – full details can be seen HERE. Submissions on an associated Bill, the Referendums Framework Bill, also close on April 17 – see HERE.
Justice Minister Paul Goldsmith is in charge of the Bill and told the House: “At this stage, no decisions have been made on whether this Bill will proceed beyond this… Future decisions will also need to be made by the Government as to whether the bill proceeds as introduced, or whether it should be amended… We want to hear what New Zealanders think during the select committee process.”
On this occasion the Government is clearly listening, so if you have strong views on extending the term of Parliament, you should send in a submission.
The Bill would allow a new Government to do a deal with opposition parties – within three months of an election – to extend the Parliamentary term from three years to four, in return for giving the Opposition effective control of the Select Committees.
But, as Richard Prebble says, this could be a recipe for mayhem: “In principle the bill is wrong. Politicians should not be able to make a deal with the Opposition to extend their time in power. In practice, having the Opposition chair select committees is a recipe for chaos. An unprincipled Opposition, protected from defamation, could turn the select committees into Star Chambers…”
There are many arguments against extending the Parliamentary term, but perhaps the strongest reason for not doing so is the thought of having to endure a government like the 2020 Ardern administration for four years instead of three. By imposing a cancerous agenda onto our country during their three years of unbridled power, they did incalculable damage. Imagine the carnage another year would have caused!
Since extending the term of Parliament represents a major constitutional change, if ACT’s Bill becomes law, it would need to be approved by a binding referendum of voters.
Should this be the case, there are two other crucial constitutional matters that New Zealanders should also be given the opportunity to vote on. These are whether the voting age should be lowered from 18 to 16, and whether the Maori seats should be retained or abolished.
All three issues should be combined into a “Constitutional Referendum” and put to voters at the next election.
With Labour, the Greens and the Maori Party all supporting the call to lower the voting age, it is crucial that New Zealand voters have the opportunity to dismiss this concept once and for all.
And with the Maori seats already causing an overhang in Parliament – as well as having a disproportionate influence – the Maori Party’s aggressive campaign to switch voters onto the Maori roll to increase the number of Maori Seats has become a critical concern for voters.
This outcome was predicted by the 1986 Royal Commission on the Electoral System, which warned that if MMP was introduced without the Maori seats being abolished, the resulting over-representation of Maori in Parliament, would have a discriminatory impact on other New Zealanders.
Their recommendation was for “no separate Maori constituency or list seats, no Maori roll, and no Maori option… All New Zealanders would vote in the same way.”
Given the increasing radicalisation of the Maori Seats within our Parliament, and the disruption that is now causing, New Zealanders deserve to be given the choice between apartheid or democracy.
A binding Constitutional Referendum asking the following three questions would give voters their chance to a say on matters central to our democracy and way of life:
1. Do you support a law change enabling a four-year term of Parliament?
2. Should the voting age be lowered from 18 years to 16 years?
3. Should the Maori seats be retained or abolished?
If you agree with the concept of this Constitutional Referendum, then please share it with others – and let your MPs know – as it is only through public pressure that change can occur.
Don’t forget all MP email addresses can be found here: https://www.nzcpr.com/have-your-say.
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THIS WEEK’S POLL ASKS:
*Do you support the concept of enabling the term of Parliament to be extended from three years to four years?
*Poll comments are posted below.
*All NZCPR poll results can be seen in the Archive.
THIS WEEK’S POLL COMMENTS
| The whole system is wrong – undemocratic. God knows how we can set up a system that actually does function democratically. For a start Parties would have to go so that we could vote for a person to represent each constituency, and no special Maori votes. That would be a start in the right direction. | Leonie |
| I support a 4 year term but only if, when Labour ,Greens, and TPM are in power they only get 1 year, that will be all the time they need to ruin New Zealand. | Lyn |
| Without a written constitution, too much damage can be done in four years. We saw what Jacinda did in six years- destroyed our economy. With more and more foreign governance, our politicians become puppets and anything goes towards total control. Resist, rebel and push back. | Donald |
| 4 years of bad government would be a disaster. If a goverment is doing well they will be reelected after 3 years. | Gordon |
| MPs are there to serve the Country not the other way around. Still fresh on Kiwis mind what happened under six years of Labour. Time to revisit MMP system too many MPS in Parliament not Democratically Elected | Frank |
| NO! | Robert |
| 4 years gives more time to achieve policies | Andrew |
| Three is better, we then have a choice of supporting the status quo or vote for change. | Murray |
| Get rid of the Maori seats | Colin |
| makes good Sence, Only problem would be if the big spenders on Social Welfare are in, Then oue Dedt would Increase Rapidally. | Richard |
| There’s not a party worth keeping in for that term. | steven |
| It takes too long now for Parliament to make a decision. An additional year would only add to the problem. | Ian |
| Simply because too many voters think only of their personal position and not the overall position of the country and how NZ has a budget that must be used to support the best overall benefit for every New Zealander in all areas, especially Health, Education, Housing. NZ budget is not a bottomless pit, loans must be repaid by future generations and the focus in these times must be new to have not like to have. | Rita |
| But before embarking on a 4 year term the weak NZ laws need to be strenghened to deal with seperatism and apartheid. | Henk |
| 3 yrs – if they are good we can vote them in again 4 yes – if they are bad, they could do incalculable damage in that time | Gail |
| Far too damaging if an absolute majority wins an election. We have little enough democracy already. | Roger |
| Just too dangerous in the current situation. | MARY |
| Gives the stupid people in parliament more time to stuff things up more | mike |
| Do the work required within the time frame | gaye |
| Three is enough | Jil. |
| I agree with your article | Doris |
| Subject to good controls, provided that 1. Question. Should voting age be lowered from 18 to 16 years? 2. Should Maori seats be retained or abolished? | Don |
| No, if there is a corrupt government, then waiting another year to get rid of it could do more damage. | Laura |
| If the Green party, Te Pati Maori and Labour were in power for four years, the country would most likely capitulate socially and economically. Under the last Labour Govt NZ lost many small businesses due to the quite unnecesarry lockdowns forced on us by the powers that be. Information today reveals it was a huge over reach by the Adern led administation. You can’t trust Hipkin’s and Company not to repeat such a henous outcome should matters arise with similar intent. Perish the though of four years with that crowd at the helm. | John |
| Provided all three items are in the referendum. | Andrew |
| Only when we see that we are getting good, honest, true representation government, should it be extended to 4 year terms. | John |
| Hell NO – bad enough now & yes procrastination would be an even bigger problem – get rid of them all I say, we don’t need them – let the REAL People govern | Jill |
| I support the concept but without the ability to negotiate with the Opposition. NZ ers must decide, not politicians. | Marilyn |
| Not without some safeguards such as ‘recall’ ability. Four years has been rejected at least twice and rightly so.. | Roger |
| I agree with Richard Prebble article. | Martyn |
| More time to mess things up. | Lee |
| Considerable harm can be done in NZ in 3 years by politicians. A 4 year term would give politicians unbridled power that would be difficult nigh I,possible to rectify. | Virginia |
| Four years under Ardern would have been the nail in the coffin | Bryan |
| Too much time for too much possible damage. Things not being achieved in resonable time ie procrastnation | Heather |
| Swings between one government ideology and another will be stronger and more difficult and destructive to correct | Brian |
| Agree with Richard Prebbles comments | John |
| Especially after the adern debacle | sandra |
| Govts would procrastinate on decisions and we don’t need an Adern type Govt in for four years. She caused enough mayhem in 3 years. The voting age should stay the same. | Chris |
| Definitely not under the current MMP system where NZ’s political system has been hijacked by radical activists. Only unless the current voting system was changed back to first past the post & the number of MPs reduced significantly. | Greg |
| 3 years is still far too long. A recall mechanism could be an option though… | richard |
| Like most if not all Ardern’s decisions,this one is one of the more stupid she put us in. The cost to us is ridiculous and Luxon should call it for what it is,a con job.I doubt he has the guts to pull us out. | Peter |
| Yiou’re right! They do enough damage in three years! | Michael |
| Definitely not.Prebble is right . Pressure to achieve results is vital. | Bernie |
| The government can do enough damage in three years. | Gavin |
| 3 years is plenty without voter approval. | Gerry |
| not sure | anthony |
| It will cause the end of democracy if it is extended | Dominique Greenslade |
| It should be cut to 2 years and the 3 months before an election should be cut to 6 weeks with a limit of 4 weeks to form a government other wise there is another election in 4 weeks. Cut the dithering. | Martin |
| Four years will provide the time for our democracy to be governed more efficiently and economically | Tony |
| 3 years of a bad government is too much | Wayne |
| No, it must stay at 3 years. Get a disastrous government like we currently have with National betraying their voters, or the previous two Labour/Labour-led governments, and they can do a hell of a lot more damage to our democracy and country with an additional year in office. NO! | Colin |
| Too many stupid egos in the House | Gill |
| Imagine the further damage Labour would have done with another term. More of them, the racist Maori Party and the loony Greens. No Thanks. If the elected government does a good job – they’ll be re-elected. If they don’t – they won’t. | Christine |
| No way ! | Alan |
| The focus is on the wrong area – we need another referendum on a choice between MMP & FFP. I’m sure the antics of TPM & the Greens will be enough to persuade voters that MMP is a bad idea and constrains governments from implementing their manifestos. What we have is a rabble on the left and an insipid centre -right government full of compromise | Peter |
| I’m not sure, the elections seem to come around very fast! | June |
| As long as it is a good Govt and not the left leaning wreckers | Colin |
| I am of the opinion that one more year is essential to see the ruling party implement and see the fruits of new laws brought about by them. In the same way as we only were able to see the devastating impact of the Jacinda Government in the second term. After 4 years voters have a clear indication of the growth and progress from the current government and can make more informed choices in the next election. | Pavithra |
| Hell no!!! | Sheena |
| If a goverment is doing a good job they will win another term , 3 years is long enough to get good policies on track , 4 years means the country would suffer devestating damage if we got another adern or hipkims. | Phil |
| It is high time to stop the national/Labour ping pong, both are now totally corrupt | chris |
| thet want another year to stuff around? instead of getting things done? | Chris |
| No. What we really need is the ability to trigger a recall like they have in some parts of the world, whereby if sufficient citizens are of the view that the government needs to be removed, then a Recall election/referendum can be initiated to remove said government before they do too much damage. | Greg |
| It depends on what government is in power. | Terry |
| Continuity is important | Ian |
| Time to get rid of the Maori sears. Disproportionate numbers of them in our parliament. | Heather |
| Four year term is consistent and should be adopted. | Norman |
| Gives the Government more time to do meaningful stuff | Graham |
| Providing the local govt cycle changes to 4 years with lg elections held at the 2 year break. In addition, a recall provision is implemented that allows the community to legally sack an appointment. | Raymond |
| When we get shit governments in power like we get I want them gone, sooner the better. Should we get a great strong government in power they will gain re-election no worries | John |
| What universe is Simon on I wonder? | Judith |
| As long as act are in power. | John |
| Not enough to support any new policies at present | Bryan |
| Enough damage/inaction is created in the current term so an extension would exacerbate and take longer to fix. | Robyn |
| If well organised in advance there is no reason why new policies can’t be implemented within three years. And a bad Govt can do too much damage if given an extra year. | Vic Allen |
| At this stage, with the dire state of some political parties in NZ – The Greens and Te Pati Maori in particular – who openly promote a separatist racist agenda, I would not support extending to 4 years. | Derek |
| They already make enough mistakes and poor judgements in 3 years. Imagine the damage they could o in 4. | Doug |
| 3 years is way too short. | Leah |
| One more year of Ardern than we had to endure would have sent me to the funny farm. | Doug |
| Any term is to long to an unaccountable corporation masquerading as representatives of the people. | neil |
| No , we don’t need our politcians to have an xtra year in parliament, but we need a much better organised government, an upper house, change to preferential voting system, and a meritocracy system for experience for M.P’s that will hold a seat, and end M.M.P, which has not worked. | David |
| No way. Imagine if Adern had 4 years, the country would be banrupted by election time. Also the problem of a party not revealing their true agenda. Definite no no. | Terry |
| Absolutely NOT. After the damage Jacinda Ardern did to New Zealand I would never trust any government for FOUR years. | David |
| We do not need a longer term of Parliament. What we need it a government better organised to move more quickly with their reforms. And if they do a good job they will almost certainly be re-elected. | Murray |
| No – a four year term would make politicians even more arrogant than they already are. | Pete |
| ACT’s Bill is stupid. Having parties doing deals to stay in power for longer is dangerous. And giving opposition parties the power over select committees is a recipe for disaster. We need to stick to 3 year terms. | Hilary |
| Trump’s tariffs make sense to me. Switching the incentives from taxing income to taxing imports is a great thing if it enables zero tax for most Americans. Imagine the incentive that would create for entrepreneurialism and hard work. The US would boom! | Simon |