Israel-Iran attack: AA says petrol price panic pointless, severity of strikes will dictate impact on consumers
But any impact on New Zealand motorists and flyers should at least be delayed, the Automobile Association said.
'I saw the pre-attack indicators,' AA principal policy adviser Terry Collins told the Herald.
'The price of oil jumped about US$5
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NZ Herald
2 hours ago
- NZ Herald
New Zealand will be worse off than its competitors under new US 15% tariff regime, international business group warns
'What people have been talking about a lot is the competitive disadvantage relative to other partners because this is, to quote Stephen Jacobi, not about running faster than the bear, it's about running faster than the person next to you. 'All along, the idea has been to run faster than the guy next to us, who in this case is Australia, Uruguay, Argentina, if you're in beef, or Chile if you're in wine.' Importers typically pay tariffs through customs agents when they pick up goods. 'But basically, people have contracts and that tariff is sometimes shared, sometimes passed back to the exporter, and sometimes the importer will absorb it and pass it on to the consumer. 'So it's a little bit case-by-case, but that doesn't take away from the fact that it makes our goods globally less competitive,' Roxburgh said. 'We do sell very high-quality goods into a wealthy market, so only time will tell whether that's going to hold up and whether we'll be able to pass that price on to the consumer and whether the consumer will be willing to pay more.' Roxburgh said the US move would help reinforce New Zealand's trade ties with other countries. 'The important point here is we have a good network of free trade agreements and tariff-free access to a diverse range of countries, and that's an opportunity for us. 'But by the same token, you don't invent or temporarily pivot to new markets overnight. 'Exporters spend a lot of time in finding the right partners, finding the right supply chains, distributors and on marketing infrastructure. 'The idea of diversification has been around for a long time and exporters are well aware of that, but the US is a premium market for our goods.' Some New Zealand exporters already pay a MFN (most favoured nation) tariff, sometimes of about 2% or 3%. 'If you're now taking 15%, some are getting up close to 20%, which is real commercial pain, so the 15% is additional to what some were already paying.' The NZIBF represents some of New Zealand's biggest exporters, with a combined turnover of $30b. Fonterra, the country's biggest exporter, said the higher tariff was disappointing. 'However, global demand for dairy remains strong and Fonterra's size, scale and broad product portfolio and market mix means we are well positioned to navigate changes in market dynamics,' Simon Tucker, the co-op's group director global external affairs, said. The US is among Fonterra's top five export destinations. For Fisher and Paykel Healthcare (FPH), which counts the US as a key export market, the revised tariff regime is expected to have a small impact on its bottom line. The company makes about 45% of its volume in Mexico and 55% in New Zealand, with about 43% of its revenue coming from the US. About 60% of US volumes are supplied from the company's Mexico manufacturing facilities. In March, the US enacted a 25% tariff on products imported from Mexico that are not compliant with the US-Mexico-Canada Agreement (USMCA). Almost all FPH products imported into the US from Mexico are USMCA-compliant. Forsyth Barr senior analyst Matt Montgomerie said the market had been modelling its forecasts for FPH on a 10% tariff on US-bound hospital products out of New Zealand only. Montgomerie said a 15% tariff equated to a 1% to 1.5% hit to the broker's earnings forecasts over the next few years. 'It obviously is an additional cost, but I don't think it would result in any dramatic changes in how they operate the business or the supply chain and the earnings impact, versus the 10%, is relatively small.' ASB economists said New Zealand would be put at a 'slight' disadvantage to Australia. 'But, as Canada's position shows, it could have been worse: punching back at the US only seems to work if you have some rare metals tucked in your boxing gloves. 'New Zealand will have to adjust to upwards of $1.4b of potential trade costs, which is the tariff bill US importers will need to pick up on the current value of NZ's goods exports,' the bank said. 'Whether it is lost sales or thinner margins, a proportion of that bill will impact New Zealand exporters, unless US consumers prove to have unwavering appetites for New Zealand products,' the bank said. Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
Otago Daily Times
2 hours ago
- Otago Daily Times
Counting the costs of tariffs
What an arbitrary and unfair world. While New Zealand might not be stung as badly as many others, it is still being penalised by capricious and unjust tariffs. This nation has virtually no tariffs (about 0.8%) on goods from the United States, while US-owned giants like Meta, Microsoft and Google extract billions of dollars through tax avoidance. New Zealand, long a close friend internationally, has been forced to tread carefully around US President Donald Trump. It recently welcomed an FBI office in Wellington and has held back on pledging recognition of Palestinian statehood. Nonetheless, the baseline 10% tariff imposed by the US earlier this year rises to 15%. Why? New Zealand recorded a trade surplus with the United States last year. If food prices had not been high, or if New Zealand had imported a few US aircraft, the balance might have been reversed — and the 10% might have stayed, as it has for Singapore and Australia. However, the US might still have made dismantling Pharmac a condition of a better deal. It is, of course, futile to appease bullies. There are effectively no real negotiations. Mr Trump issues decrees, and only afterwards might there be limited room to move. The might of China may have muscle, especially because of the US debt it holds. Puny New Zealand is simply too small. If there were just a little fairness, New Zealand could also apply 15% to US imports. Nobody, however, is seriously proposing that. New Zealand has staked its reputation and its interests as a trading nation on free trade. It also dares not provoke the Trump tactic of responding with another ratchet of the rack. It says much about the state of play that wily Foreign Minister Winston Peters and others advocated keeping this country's head down. Mr Trump has so many big fish to fry — discussions are continuing with China and the European Union on the trade front alone — this seemed the wisest course. In a flurry of action, New Zealand's head trade official is now off the Washington, and Trade Minister Todd McLay will follow. Unsurprisingly, there is scepticism that this will do much good. Previously, such efforts failed to reduce steel and aluminium tariffs, and tiny New Zealand will struggle to receive much air or ear time at the highest levels. Politically, however, it makes the government look as though it is doing something. Despite Labour's criticism of poor tactics, it is doubtful whether proactive and public lobbying in Washington would have made any difference. The resulting 15% tariff matches that applied to US allies Japan and South Korea and is slightly lower than much of Southeast Asia. However, it is higher than the rate for fellow beef exporters Argentina and Uruguay. The US is also New Zealand's largest wine export market. Wine receipts are expected to suffer, and F&P Healthcare, one of New Zealand's largest companies with manufacturing in Auckland and Mexico, will be disadvantaged as it competes with a major US rival. Exporters were reconciling themselves to 10%, and 15% might not sound excessive. But it represents a 50% increase on the earlier amount and is far harder to absorb. The result will be lower returns for exporters and higher costs for consumers, while the US collects tariff revenue. Trade Minister Todd McLay estimates the tariff cost to exporters at an additional $500 million. Fortunately, this coincides with strong global food demand and prices. Unfortunately, it comes at a time when the New Zealand economy is struggling to recover from prolonged doldrums. Although not catastrophic, it dents confidence and removes another brick as the government tries to rebuild economic growth and salvage its electoral prospects. The US has overtaken Australia as New Zealand's second-largest export market, worth $9 billion last year, though still well behind China. New Zealand will bear the costs of President Trump's disruptive trade policies, both directly through tariffs and indirectly through their dampening effect on US and global growth.
NZ Herald
a day ago
- NZ Herald
‘It's a massive tax' - can Trump's tariffs reduce inequality, or will they enhance it?
The President doesn't talk much about inequality. But his animating argument for tariffs — that they will pressure companies to bring well-paid manufacturing jobs back to America — is pitched to those workers who felt left behind and neglected. So, will the tariffs reduce inequality? Probably not, and here's why. Hyper globalisation certainly contributed to America's rising inequality. Consumers saved hundreds of dollars on the cost of televisions, shoes, and comforters. But many middle-class livelihoods and communities were destroyed when factories either relocated to countries where wages were lower or went bust because they couldn't compete with cheap imports. China's entry into the global marketplace at the beginning of this century delivered a major wallop. Between 1999 and 2011, Chinese imports were directly responsible for the loss of 2.4 million American jobs, according to researchers. It is true that more jobs were created, but many of them did not pay as well as those that were eliminated, nor were they taken by the workers who lost out. Still, cheaper imports were only one part of the story. Automation and the creation of a digital economy that introduced online selling and cloud-based services had a far greater effect on the American economy. Take manufacturing. Of the six million factory jobs erased during the 2000s, Chinese imports accounted for about one-sixth of the losses, or one million jobs. But the other five million were killed off by other forces. For years, labour unions had bargained for higher wages, overtime pay and other benefits. But their ranks significantly declined. A street in Elyria, Ohio, once home to many manufacturing plants, on September 18, 2017. Many middle-class livelihoods and communities were destroyed when factories relocated to other countries. Photo / Andrew Spear, The New York Times Automobile factories, for instance, not only moved from Michigan to Mexico, they also moved to southern states including Alabama and Tennessee, where anti-union laws were common and wages were lower. I visited a meat processing plant in Storm Lake, Iowa, during Trump's first term. One of the workers was hired in 1980, when it was a union shop. His starting salary was US$16 an hour plus benefits. When I met him, 37 years later, that plant was no longer unionised, and his pay was still US$16 an hour. The growth of mega firms like Google, Apple, Amazon and Walmart that ate up or weeded out the competition also gave companies power over pricing and wages. The result was that the slice of the total economic pie going to workers shrank. If inequality has multiple causes, why do trade and globalisation get blamed so much? The fallout from globalisation packed a particular punch. Trade can cause economic losses to pile up and overwhelm a locale, such as Hickory, North Carolina, once a powerhouse of furniture making. Another reason is that political leaders exploit economic setbacks and insecurities. Trade offered a simple and satisfying explanation — even if not wholly accurate — that outsiders were to blame. For many people, foreign competition also set off deep cultural and economic anxieties. Diana Mutz, a political scientist at the University of Pennsylvania, argues that many Americans, including Trump, view trade as a zero-sum game rather than a co-operative enterprise in which everyone can benefit. Foxconn workers on an assembly line at Quanta factory in Chongqing, China, on November 27, 2012. In the early 2000s, Chinese imports were directly responsible for the loss of 2.4 million American jobs, according to researchers. Photo / Gilles Sabrie, The New York Times Through that lens, trade is a pitiless dogfight that is desirable only if the US is the 'winner' and other countries are losers. Americans also tend to expect the government to respond more strongly to job losses that result from trade compared with other economic forces. Dani Rodrik, an economist at Harvard University, helped conduct a large online survey in which respondents read a made-up newspaper article about the closure of a garment factory that provided different reasons for the shutdown. One group was told it was because of new technology. A second was told management bungling was the culprit. A third group was told trade, such as relocating production abroad, was the cause. When trade was the cause, the number of people who demanded that the government respond doubled or tripled. 'Foreign trade is particularly prone to charges of unfairness,' Rodrik writes, because countries operate under differing rules and conditions. Government subsidies, weaker health and environmental regulations or sweatshop conditions, for instance, bestow an unfair competitive advantage. For decades, 'fair trade' has been the rallying cry of protectionists who complained of an uneven playing field. A former glass factory is set up as a battery factory in Bridgeport, West Virginia, on February 9, 2023. Oren Cass, the chief economist at American Compass, a conservative think-tank, says that factories can boost regions that need it. Photo / Andrew Spear, The New York Times That sounds like Trump's tariffs could make a difference, no? Tariffs can certainly affect how income is distributed — either increasing or decreasing inequality. Oren Cass, chief economist at American Compass, a conservative think-tank, says that with the Trump tariffs, the effect would be positive. He argues that factories, often located outside of the tech, finance and media capitals, can boost regions that need it. A factory creates jobs and serves as an economic hub. That in turn generates other jobs — for barbers, baristas, and manicurists. 'Reorienting the economy toward one that is going to better serve the average worker,' could reduce inequality, Cass said. But other economists disagreed, arguing that the President's tariffs and the haphazard way they were imposed will amplify inequality. While some select industries will benefit from added protection, the biggest burden, they agreed, will fall on low- and middle-income households. The cost of pretty much everything will go up because of tariffs. 'It's a massive tax,' said Kimberly Clausing, a professor of tax law and policy at the UCLA School of Law. She expects that four out of five Americans will be worse off. So far, the overall average effective tariff rate has jumped from 2.4% in early January to 18.3%, according to the Budget Lab at Yale University. On average, higher prices will end up costing each household an extra US$2400 this year. Shoes and clothing prices, for example, are expected to rise by as much as 40% in the short run, the Budget Lab estimated. Prices are expected to stay at 17% or 19% higher over the long run. US businesses, particularly small and medium-sized ones, will also feel the pinch of higher costs. Some 40% of imports are used to produce or build things in the US. Construction costs are likely to jump. The Budget Lab estimates that by the end of this year, US payrolls will shrink by nearly 500,000 jobs. As for manufacturing, the number of jobs might grow, but they won't be like the well-paid ones that high school graduates used to get. Most factories are highly automated and run with computer technology. Last year, the US steel industry employed 86,000 people and produced roughly 88 million tonnes of raw steel. In 1970, it took 354,000 steelworkers to produce that same amount, according to the American Iron and Steel Institute. I recently visited one of the largest steel plants in Europe. I saw titanic machinery and control stations with computer screens, but hardly any workers on the floor. Today, the best paying manufacturing jobs require significant training and skills. Those that don't, offer low wages. At the moment there are more than 400,000 unfilled manufacturing jobs in the US. Even if the US$1.2 trillion trade deficit were erased, and purchases of foreign goods were replaced by domestic ones, the US would still not turn into a manufacturing powerhouse, said Robert Lawrence, an economist at Harvard University. Nor would it reduce inequality. Under that scenario, Lawrence calculated that manufacturing jobs would rise from 7.9% to just 9.7% of total employment. And less than half of those would actually involve work in production. The rest are in sales, management and accounting. Lawrence, whose book Behind the Curve examines the role that manufacturing plays in the economy, explained that 'even if all these policies were actually successful in bringing back as much manufacturing as possible, it's too small to change the basic income distribution in the economy.' This article originally appeared in The New York Times. Written by: Patricia Cohen Photographs by: Mark Abramson, Andrew Spear, Gilles Sabrie ©2025 THE NEW YORK TIMES
