Half A Brain
OPINION: When Donald Trump returned to the White House, many people with half a brain could see the results for the world might be a bit average, and our boy has been busy trying to prove them right.
Kimberly Crewther, executive director of the Dairy Companies Association (DCANZ), says the way the tariffs have been applied to NZ and other dairy exporting nations to the US will severely disadvantage us.
"We are very disappointed and what will happen is that the lower tariffs that are being applied to other countries will end up giving them a significant advantage over us," she told Dairy News.
NZ dairy exports to the US are worth roughly $1.3 billion dollars or about 5% of our total exports.
But the US is by far the largest importer of our casein and whey products (32% ahead of China at 24%). It's the whey concentrate protein that poses the biggest problem for NZ, according to Kimberly Crewther.
"We are now facing a 15% tariff, or more than that, because the 15% that Trump has just imposed is on top of the most favoured nation WTO tariff which has been in place. At the same time, the Canadians will continue to export into the US market duty free," she says.
Crewther says they have additional fears that Canada will also export artificially low-priced dairy products there, which will exacerbate NZ's disadvantage to Canada.
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Butter is another concern, and the US takes about 5% of our exports. But this is where the situation gets worse for NZ. The 15% tariff imposed on us is different to the 15% imposed on the European Union (EU). The way the system has been designed by the Trump administration is that if their tariffs are higher than 15%, this will be ignored and they will only pay 15%, whereas NZ has the 15% imposed on top of the existing tariffs. Sounds complicated and odd - and it is just that.
Our infant formula exports to the US are also about to take a hit, according to Crewther.
"Our products face a 32% tariff as opposed to the 17% tariff that has been imposed on the EU, and there is even a suggestion that the US may impose other restrictions to protect their consumers," she says.
Because Australia has an FTA with the US, it will only pay an additional 10% tariff on top of the low existing one linked to the FTA.
Where To From Here?
Kimberly Crewther says there is still a lot of detail to work through and it's a bit of a wait and see game to determine the full impact of Trump's blanket tariff policy.
She says questions remain about who will pay for the 15% plus tariffs - will it be the consumer, the company or will it be shared?
"That will be a commercial negotiation," she says.
On the positive side, Crewther points out that our dairy products have a good reputation in the USA market for their quality and functionality, but how the issue of price will play is still a matter of conjecture.
She is full of praise for the quick response by the NZ Government to get its top trade negotiator, Vangelis Vitalis, to Washington to assess the situation. Trade Minister Todd McClay also plans to go there soon.
But while no one doubts the importance of these interactions with American officials, it seems highly unlikely that the US will do a U-turn, despite the economic consequences on a 'friendly' New Zealand. In a recent op-ed in the New York Times, American Trade representative, Jamieson Greer made it very clear that the rules-based systems of the World Trade Organisation (WTO) has outlived their usefulness and penalised the US. He said this system was untenable and unsustainable and cost America jobs and economic security. He dubbed the present tariffs as the 'Trump Round'.
Our present trade imbalance with the US is the reason we got a 15% tariff rather than the 10% imposed on countries who don't have an imbalance. And the word from Washington is that NZ was 'lucky' it only got a 15% tariff; in sense, that may be so with all the ASEAN nations such as Vietnam being hit with a 19% tariff. While NZ will protest, it will do so with care, noting that when Switzerland had a somewhat acrimonious dialogue with Trump, he bumped up their tariffs from 31% to 39%.
