Photo: AFP
United States President Donald Trump began making tariff threats even before returning to office on January 20.
From a universal duty on imports to tariffs directed in specific sectors or countries, it is difficult to follow.
Meanwhile, retaliatory movements intended to injure US exporters were symbolic, if not impactful.
The rates that are and again caused confusion and uncertainty. It is not difficult to see why economists are concerned about a trade war.
But from aluminum to Tennessee whiskey, how do governments choose what to target?
First, what are tariffs?
Tariffs are taxes or fees charged on goods imported from other countries.
To make it clear, companies that import goods pay the tax to the government. (Some or all costs can be transmitted to consumers.) Usually the tax is a percentage of the value of a product.
The main objective of a fare is usually to rule out the demand of imported goods and towards those produced in the domestic market. This can be in response to the industry lobby. For example, the US meat industry has previously asked for fares in the New Zealand Lamb in an attempt to help local producers in difficulties.
Tariffs can also be used to coerce other nations to implement certain policies. US technology giants encouraged the Trump government to segment Australia, about its rules governing social media services and streaming services.
Tariffs have already been great money creators for governments in the US, New Zealand and other countries. But in recent decades, they have played much less role.
Tariffs to this day
Trump talked about a release in universal tariff phases about all US imports.
He also talked about reciprocal tariffs, in countries that tax imports from the US or have non -tariff barriers, such as safety standards that exclude US manufacturers.
The main trading partners in Mexico and Canada were targeted, along with China, following warnings about the interruption of illicit drug flow and immigrants in the US.
And the tit-force between the US and the European Union is underway.
We will know more after April 2, the day Trump nicknamed “Liberation Day” when he announced reciprocal tariffs in other nations.
He promised to review the global trade system, corresponding to the rates and other policies that countries impose on US exports. He argued that his movements will end the years that the US is “stolen.”
But more recently, he suggested that reciprocal tariffs may be less serious than expected, saying, “I can give many countries to intervals.”
Whiskey, motorcycles and jeans: retaliation tariffs
In general, there are three options for countries at the end of policies like these, said Dr. Matthew Castle, senior professor of International Relations at Victoria de Wellington – Te Herenga Waka: “You can retaliate, accommodate or discover a location.”
When it comes to retaliation, while taxed items may seem random – there is a lot of conversation about whiskey, motorcycles and jeans, for example – in fact, they are strategically selected.
“Countries are careful with which products they choose to increase retaliatory barriers.
“They choose these products so as not to impose economic pain, but the maximum amount of political pain on the recipient country.”
Products with high symbolic value, for example, such as Levi Jeans and Harley Davidson Motorbikes. Or products from which prominent politicians have their base.
“What you are trying to do with retaliatory rates is to force your partner back to the table. You are trying to create the largest political lever with the least cost of costs for your own consumers. Because we know that imposing tariffs harm their own people.”
Winners and losers
Tariffs can be disturbing in two ways, Castle explained.
First, there is the immediate impact of less sales, because products become more expensive on a foreign market.
“But [tariffs are] Also disturbing, because everyone faces the challenge of finding out what to do with things they would usually send to the US so they are looking at other markets. “
In addition, commercial relationships cannot be “turned on and off,” he said. “It’s not simple to suddenly change where you export things.”
This is where other New Zealand trade agreements can put the country in an advantageous position: “One way to help us is if our trade agreements make our imports more competitive than imports from other places.”
It is not always obvious who, at the end of the day, is making money versus who is paying.
Normally, governments benefit from the rates they impose, Castle said. “But from the point of view of political economy, the main beneficiaries are import competition industries. The producers of a country that are less competitive than their colleagues abroad, who would otherwise compete against them.”
Trump argued that tariffs will protect homemade manufacturers.
But “tariffs will make everything more expensive for us consumers,” Castle added.
“And how global markets are so integrated – you import materials that become somehow before exporting them – producers will also be paying more for things.”
Auckland University Economics professor Niven Winchester agreed, saying that modeling has confirmed the “known” result that commercial wars decrease global economic activity and routinely worsened all nations.
“The US is playing a dangerous game,” said Winchester, a senior member of the Motu Independent Public Policy Research Institute. “Mexico and Canada will be hit hard, with up to 80 % of their exports going to the US.
“But if the US takes over several great players, and they retaliate, the US will be second. If the US is against the world, the US will lose.”
How does all this affect New Zealand?
Like a small nation, New Zealand depends a lot on trade.
From the 1840s onwards, the government was based on border tariffs imported to revenue. Income tax was introduced in 1891, but tariffs remained the largest source of tax revenue until World War I.
In the 2000s, as the country made free trade agreements, most of the New Zealand tariffs were gone.
By 2024, the US surpassed Australia to become the second largest export destination for New Zealand products, with a total of $ 9 billion, according to New Zealand statistics. China remained New Zealand’s largest export destination, with a total value of nearly $ 18 billion.
Meanwhile, Aotearoa was out of the 50 main countries from which the US buy goods.
A report from the Leader S&P Global Ratings credit agency has suggested that New Zealand can relatively slightly escape any US fare imposed on the Asia Pacific region.
The region would feel a “tightening” of US tariffs, but it would not be “suffocated” by them.
Winchester told RNZ that the situation presented opportunities and challenges to New Zealand.
The tariffs directed at us like Canada, Mexico and China could put New Zealand producers by exporting to the US at a small advantage. And if the US aims to Australia, it may also benefit theotearoa.
But rates will decrease income in these other countries, which means they will have less money to spend on New Zealand goods.
And because, as mentioned earlier, global markets are so integrated, the price of US goods (those sent to New Zealand included) will increase.
“At national level, the proposed tariffs will have a relatively small impact on New Zealand, but there will be pockets of the economy that will have great impacts,” said Winchester. “For example, a farmer who buys specialized agricultural equipment produced in the US may face a substantial increase in price.”
Another uncertainty is how the US will also adjust to non -tariff trade barriers: “In response to quarantine requirements, for example, we could see some really high agricultural tariffs entering.”
It’s not just tariffs, but the uncertainty around you is harmful to the economy, he said. Companies and consumers will be postponing long -term investments.
“There is one who says companies prefer to live with well -known bad results than not know what the result will be.”
