NZ - US Trade Relations
Short of 3 months and President Donald Trump has given most international (and US domestic) politicians, social and industrial leaders something to scare them. Part of this is trade barriers, better know as taxes for US citizens. But a look at the trade balances tells the story that the President is energised about – trade balances are not good for the US, and getting worse.
President Trump has (if you believe in the Constitution) little time to effect a large change, and though NZ isn’t in the top 50 import drivers to the US, it is part of the problem and suffers a 10% import tariff to the US for goods, but not services.
The US has been increasing in trade, becoming the second player over Australia.
Stats NZ
Exports like meat, dairy produce, wine and other primary produce products lead the way through trade relations vs. machinery, flight machines, telecom, vehicles, etc. coming the other way.
Stats NZ
According to the US Office of the Trade Representative, NZ had a US $1.1 billion advantage in the goods trade balance last year – NZ exported to the US $5.6 billion and received US $4.5 billion. That ratio based on the gap vs. US exports to NZ is 24.4%. Not withstanding there is less than a 2% trading barrier each way, 10% tariff is only part way to compensation. Using 2023 figures from NZ, where there are Services figures along with Goods, the picture is more troubling:
By breaking these down it becomes clear that Sevices are an extra potetial source of trouble. In that year, the Soccer World Cup and the increaced fans from the US were a key feature.
Looking above at the individual exporting records it is interesting to compare it to the graph below, the exchange rates prevelant.
RBNZ
This shows that the rise in the US and European records are due, in part at least, to the decline of our exchange rate. In the following chart which plots the US-NZ exchange rate over the past 10 years, it shows that the US is buying at US$0.55-$0.60 and picking up a bargain.
OFX
There seem to be a number of solutions to this problem:
Raise the exchange rate, flatten the gap with the US, and convince them to trade at par. Unfortunately there is not much NZ can do to adjust the NZ-US rate, as it relies on Australia.
Emport more to other countries. Prime Minister Luxon and company is doing all they can to raise the level of interest in NZ, our primary production plus manufactured goods and services. But the problem will exist as long as the US-NZ exchange rate remains favorable to buyers in the US.
Accept it for the time being. This isn’t going to solve the immediate problem, but if it keeps the attention away from Services it defers a larger issue.
There will be changes going forward – let’s hope they are positive for NZ!