NZSA Disclaimer
The latest announcement came on Saturday May 24th, New Zealand time. “Trump threatens 50% EU tariff as talks hit wall” screamed the Fox News headline, quickly echoed on all major news networks in the US and around the world.
It’s the latest in a blizzard of announcements from President Trump in his second term, all creating a deep sense of uncertainty for investors and disruption across investment markets.
Of course, it wasn’t the “latest” announcement. That actually came late yesterday (Sunday May 25th) NZT as Trump announced a reprieve, to allow time for further negotiations.
Trump’s Tariff Rollercoaster
Trump’s tariff playlist is a bit like a tour of my personal Spotify account – eclectic, random and difficult to keep track of. But just like any good music playlist, there is a common theme to it all – Trump has believed in the value of interventionist economics, in the form of tariffs, for a long time. In fact, US trade actions implemented during his first term as President (2017-2021) acted as a clear warning of his likely actions during his second term.
In late January 2018, Trump slapped duties on large residential washing machines (20% on the first 1.2 million units, 50% thereafter) and on imported solar panels (30% stepping down to 15% over four years). Just over a month later (March), steel and aluminium were hit with 25% and 10% tariffs respectively, with a later announcement of a detailed probe into China’s trade practices. By June 2018, this had led to a 25% duty on US$50 billion of Chinese goods, later increased to an additional 10% spanning US$200 billion. During 2019, Trump’s focus swung back to Canada and Mexico – with the threat of a 5% tariff. This was never implemented, following negotiation, in favour of a security investigation into the supply of car parts.
While this was an interesting backdrop for New Zealand investors, our lack of exposure to those tariffs mean that they never captured the imagination of local investors. Nonetheless, the moves offered a directional signal for the global economy – reflecting increasing policy shifts protectionism and even economic isolationism, bucking the prevailing economic wisdom of the last 40-odd years.
Fast-forward to 2025.
What a difference a Presidential term in the wilderness makes. Three months after his election, Trump made his intentions plain. On February 10th 2025, steel and aluminium tariffs were re-imposed at a flat 25% on all countries—no more exemptions—under fresh proclamations. This was a mere appetiser to the main course, however, with “Liberation Day” on April 2nd unveiling a 10% universal tariff on virtually everything (effective 5 April) across all countries and territories around the world, plus bespoke “reciprocal rates” for some 60 trading partners.
Sadly, these “reciprocal rates” appear to have been based on some unusual calculations. Rather than tariff rates, the objects of Trump’s ire appeared to be those nations who operated a trade surplus with the US. This is significant for New Zealand; our little nation recorded a NZ$7.8 billion trade surplus with the United States in the year to April 2025, including a record monthly surplus of NZ$1.4 billion in April itself.
Still, if Air New Zealand ever get around to buying those new aircraft they need from Boeing, our trade surplus would vanish relatively quickly.
At a personal level, as consumers, we make similar decisions. For example, I maintain a significant trade deficit with my dentist; given his capability at dentistry compared with my own, it’s a trade imbalance I am happy to encourage. There is no ‘tariff’ levied by my dentist, other than the cost of his time and materials.
However, there is GST, a tax of 15% levied by the government. Fair enough – at a macro level, it diversifies New Zealand’s tax base away from a sole reliance on income tax and also means that those who spend more, pay more. The benefits of different forms of tax are indeed a whole different conversation.
Unless you are President Trump. His view appears to hold out that New Zealand’s GST is indeed a ‘tariff’ unfairly levied on US companies.
If only he had taken a look at my dentist bills first…
Shortly after “Liberation Day”, on April 9th, Trump cranked up China-specific duties to 125% in response to Beijing’s counter-measures. On May 12th, Trump removed all “reciprocal rates” for the next 90 days, leaving tariffs at 10% for all countries. While offering a short-term reprieve, eventual outcomes will be dependent on what can be negotiated by August 12th.
New Zealand has unashamedly embraced the core tenets of economic liberalism since the mid 1980’s. While controversial at the time, the reforms started by the fourth Labour government, and followed by subsequent governments, formed a core foundation for our economy in the decades that followed. Free-market principles mean that New Zealand imports products that it cannot produce efficiently – most products are imported duty-free to New Zealand (although a limited range of products do still attract a 5-10% tariff). Conversely, we export the goods and services that we are really good at producing, which include primary sector goods (i.e., agriculture).
A free-market led economy is now the cultural norm in New Zealand, embraced by subsequent generations. New Zealand punched above its weight in global free trade leadership, with a leading position in the interminable GATT rounds (General Agreement on Tariffs and Trade) that concluded in 1993 and New Zealanders in leading positions – including as Director-General of the World Trade Organisation (Mike Moore, 1999-2002) and with Clare Kelly as the current Chair of the Goods Council (the successor to GATT).
It is telling that much of the local business commentary that has covered the events of the last 60 days has relied on anecdote and evidence dating back to the 1970’s. If – and it remains a big ‘if’ – the world continues down a path of economic isolationism, New Zealand will be forced to reshape its own economic identity and corporate leadership capabilities to adapt to the new reality.
Which kiwi companies might be impacted?
From a local investor perspective, as an export-led economy, many of our companies are likely to be directly affected, either by reduced demand or increased costs in their United States operations or global supply chains. The examples of direct impacts below are just that – examples. Investors will be looking for evidence that their management teams are minimising the impact.
Note that companies operating solely within New Zealand or with limited US exposure may also be indirectly affected, as companies domiciled in other countries affected by the US tariff regime compete more vigorously in other markets – including New Zealand.
Fisher & Paykel Healthcare (NZX: FPH)
With around 45% of its manufacturing in Mexico (of which 60% heads to the United States), FPH has warned that while FY25 profits will dodge a “material impact,” its path to a 65% gross margin could be delayed by up to three years as tariffs bite into costs.
Mainfreight (NZX: MFT)
In its 2 May “Trading Conditions Update,” Mainfreight noted a slowdown in forward sea-freight bookings on the Transpacific lane (≈ 10% of Air & Ocean volume) as customers adopt a “wait-and-see” posture until tariff talk turns to action Mainfreight.
Tourism Holdings (NZX: THL)
THL’s April trading updates flagged uncertainty in North America’s RV market—don’t forget Canada’s tit-for-tat potential—and by mid-April warned FY 2025 net profit would undershoot consensus amid a US travel slump and tariff headwinds, with the share price subsequently falling to near five-year lows.
AoFrio Limited (NZX: AOF)
The company noted the potential impact of US tariffs on its componentry, which is manufactured in Vietnam and subject to a 46% reciprocal tariff. US sales form around 12% of AOF’s total revenues.
Factors for investors to consider
Capital markets are famous for valuing certainty, with relative economic stability reflected in share price valuations and investor sentiment following the global financial crisis in 2009 right up until the onset of Covid-19. Things have been more volatile since then – a slew of factors including government monetary policy (‘quantitative easing’), increasing interest rates, inflation and lower global economic growth have made for a complex investing landscape.
Risk: The on-again, off-again nature of Trump’s proclamations on tariffs over the last 60 days are not helping create certainty in the market. While global markets reacted negatively to “Liberation Day” and have (mostly) recovered following Trump’s May 12th announcements, it is clear that short-term market movements are being determined by both the pace and volatility of Trump’s tariff policy.
While it’s the long-term that matters for most investors, increasing volatility in share price movements should give pause for thought for investors. Increasing volatility in share price movements is a reflection of increasing risk for both asset values and companies’ underlying operations – leading to an increase in structural risk. An investment strategy may aim to generate a defined level of long-term return for the lowest possible risk. In this situation, an investor is likely to be taking on an increase in risk, with no commensurate increase in return.
Pricing Power: Tariffs imposed on goods coming into the US are paid by the consumer or the importer. For goods manufactured in New Zealand and exported to the US, consumers may be willing to bear a 10% increase in price if a product commands strong pricing power. However, where a New Zealand product has to compete with many other products, the company may choose to absorb the tariff, thereby reducing its Gross Margins. Both scenarios have negative impacts for shareholders: if the consumer price increases, the company may sell less, while a company taking a haircut on its margins will likely have a profitability impact.
The same applies for investors in US companies – to what extent are they able to pass on tariffs to their domestic customers?
Supply Chain agility: Many New Zealand firms have multi-national supply chains and diverse sales geographies. Investors should keep a look out for clear strategies from affected companies as to how they intend to navigate tariff implications in the long-term. Perhaps expect an increase in US-based distribution partnerships supply chain activity. For some (like Fisher and Paykel), it might be difficult to avoid a tariff impact in the short-term – however, with manufacturing plants in Mexico and New Zealand, and a globally diversified sales portfolio, an investor might expect an optimised strategy across the company’s business that minimises tariff impacts.
Regulatory and Political Whiplash: We have already seen investment markets react to Trump’s announcements. Regardless of the day-to-day announcements from the President, there are a few key dates that investors should be aware of. August 12th is looming large, as the expiry of the 90-day stay of execution for the reciprocal tariffs initially announced on Liberation Day. Keep on expecting the unexpected – and think hard about the level of risk (volatility) you are prepared to accept.
Conscious decisions: Investors who have a long-term outlook may decide that the best move is to sit this out. Others will take advantage of ‘peak prices’ in the volatility cycle to crystallise long-term gains and maintain an oversize cash position. Yet others will decide to trim their long-term allocation to US-exposed companies. All actions might be valid for different styles of investor. Whatever you do, however, make conscious decisions that make sense for your investment strategy and reflect your own risk profile.
In the short-term, navigating Trump’s tariff rollercoaster requires equal parts vigilance and agility – because in this trade war, the only thing you can count on is that nothing will stay the same for long. Longer-term, there is emerging nervousness surrounding global investor appetite for US-based investments. A stable, certain and rational market environment with quality companies underpins investor confidence in any stock market. Depending on what happens later this year, it may be that investor confidence in US equities will be further shaken.
Oliver Mander