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Trade Minister top and Play has met with his United States counterpout, jameson Grea to discuss the trade relationship between New Zealand and the US. Remember this is in the context of Trump's twenty five percent tariffs on Canadian and Mexican goods, as well as a threat to impose a two hundred percent tariff on European wine, champagne and alcoholic products, and the threat of reciprocal tariffs on allies and adversaries alike.
So in the forty five minute meeting, Maclay stressed the importance it stressed the importance of an open market between the countries and an agreement to continue dialogue across throughout the changing trade policies. Foreign Affairs Minister Winston Peters he's still in the States discussing trade, among other things. And Oliver Hartwich is the executive director of the New Zealand Initiative and he's with us now.
Good afternoon, Good afternoon.
So I see the report. Just the report of their meeting mentions how they talked about the importance of open, fair market access between the two countries. In the context of what we're reading, that sounds like meaningless words given the contact of the States recently, isn't it.
It sounds like a softly softly approach from our government. They want to play it very diplomatically, very carefully, because they know how easy it is to anger the Americans.
And of course New Zealand's position in the context of the trade relationship is a bit difficult because we are running a trade surplus with the United States and as we all know, of course Donald Trump wants to change that, so he wants to actually correct that, and so we have to be very careful in how we approach these talks.
How bad could it be for us?
Potentially it could be very bad, because I mean, first of all, the Trump administration is a bit unpredictable when it comes to trade. We have seen what they're doing to other countries. We have seen it in a Canadian example, We have seen it with Mexico, with the European Union, and of course China as well. So it could be bad. It could be that they're targeting our agricultural exports. That's
where we're extremely vulnerable. We haven't got an easy way to switch these exports around and send them to other countries instead. So if they're really pulling through and they're putting the twenty five percent tariffs on our agricultural product produce,
then that would hit us really hard. And there are other dangers as well, of course, because you might have seen there was a I think it's still called tweet these days from Malcolm Turnbill talking about that America now targets Australia's pharmaceutical import scheme and we've got our own,
of course, we've got farmac. And one of the contentious points in the trade relationship between our countries could be that the Americans perceive they're not getting the right price for their pharmaceutical exports touwizialand which is a significant part of American exports to mwisium. So there are many ways in which America could really hurt us if they wanted to.
As a speaking of Malcolm Turnbull, that's one of the dangers for US is having one of our own politicians or ex politicians go off sort of the go off the script and catch the President's attention in the wrong way because he hasn't done Australia any favors.
Well, I think that was the reason why Phil Golf is no longer the High Commissioner to London. I mean, frankly, that's exactly the same kind of talk that we now get from Malcolm turmul except we got it from someone who was still in a government official position. No, we have to be extremely careful if we anger the Americans, if we provoke them, we might trigger even worse response. So this quietly, quietly approach that we now get from Todd McLay seems to be exactly the right way to go about it.
Are there particular arguments that we mount or is it just a case of keeping our head down, being as diplomatic and treading gently and trying to charm the other side.
Well, the arguments that Todd mclay's making is a sensible one. He says, we're exporting stuff to America that they could not potentially supply themselves. So he mentions beef exports. A lot of New Zealand beef goes into American hamburger production, basically into fast food, and they wouldn't be able to replace that, perhaps in a similar kind of way that they're currently finding they haven't got enough ex and they even trying to get them from the European Union that
they've just slapped tariffs on. So there are some arguments Tot maclay can make to the Americans that actually the trade relationship is complementary. So we're importing stuff from America that we don't even produce ourselves, like pharmaceuticals, and meanwhile they're getting high quality produced from US that they would struggle to source if they put teriffs on us.
Has the trade war impacted us at all yet or is it more just it Probably it's just impacted us because of the stock prices.
It is certainly impacting us via the stock market, and everything else will take a little bit longer because until we have these trade effects materialize, that can take a while. But what's already happening is, of course, that we see a massive amount of uncertainty created in international markets for companies planning their value chains, for companies and planning to locate their future factories and distribution centers. This is a massive headache now because you can't rely on stuff anymore.
I mean we've seen it with Canada last week. I mean this was probably of world first. We haven't in twenty tariff chart. So starting the morning with twenty five percent, then going up to fifty percent, and then going down to twenty five percent after six hours. I've never seen anything like it. So it's that kind of behavior, that kind of uncertain to create it that is really damaging to everyone.
Does it somewhere? I'm not sure if I heard Todd McLay talking about potential for flexibility with other markets, but there are there potentially opportunities that might pop out as a result of other companies. I'm sorry other countries have been hard hit by these tariffs. Maybe cooperating more with the likes of US and each other.
That will be a positive outcome. But again, all of this takes time. I mean, we all know how long it takes to negotiate free trade agreements. They are sometimes going through ten, twelve, fifteen rounds until they get anywhere closer to a solution. That can drag over years and sometimes decades. I mean, just look at how long it took us to negotiate that free trade agreement with the European Union, for example. So this is not something you could switch overnight.
No, I guess, well, actually on that then it can take years and years and years, is it? Likely to speed up or is that a possible if I was going to be naively optimistic, is a possible side effect that we might actually find that we can expedite some of these agreements that we've been struggling to get for years and years.
Well, that would be a positive effect. I mean, so far, I haven't really seen much of that. It's pretty much the same, of course, in the military space. I mean, where the whole world order is now in question. You see now that countries will try to find different defense partners, different allies, and we see exactly that in parallel happening in the trade world. But all of this will take time.
I mean, as you say, it would be nice if it could be sped up a little bit because times are urgent and Trump doesn't waste any time, and it might actually surprise us several times over the next few weeks. So it will be nice to speed that up. But it's not the way we've operated so far.
Do you hold out any sort of hope that we can sort of emerge unscathed by just being very clever and diplomatically not being big enough to worry about.
No, because it's quite the opposite, actually, where more countries, we haven't really got a massive opportunity to turn things around and really have an influence on what's happening in Washington, so we will be a price taker. And I have seen some modeling suggesting that our GDP, if it really comes to a global trade war started by the US, might go down by about a percent of GDP and that's a massive hit to the economy. So unfortunately, that's just a scenario we have to be prepared for.
Well, Oliver, I really appreciate your time this afternoon, and we'll just keep our fingers crossed over. That's Oliver Hart. Rotchie is the executive director of the New Zealand Initiative.
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