US-China trade war leaves NZ worse off, but still well placed to weather the storm – new modelling

Trump’s tariff policies create uncertainty, impacting global trade. The US-China trade war escalates with fluctuating tariffs, affecting countries like New Zealand, which rely on both nations as major trade partners.

Forecasting the potential impact of Donald Trump’s turbulent tariff policies is a fraught business – and fraught for business. The United States president has changed, paused and exempted various categories of goods so often, the only certainty is uncertainty.

On “Liberation Day” (April 2) he famously announced far-reaching “reciprocal tariffs” on imports from most trading nations. Since then he has paused those tariffs, but kept 25% on imports of steel, aluminium and motor vehicles, and 10% “baseline” tariffs on all other imports.

The big exception is China, whose retaliation against the reciprocal US tariffs has resulted in an escalating trade war between the world’s two largest economies.

On April 9, the US raised tariffs on Chinese goods to 145%, but later scaled back duties on electronic goods such as laptops and smartphones to 20%. On April 12, China increased its tariff on US goods to 125%.

With China being New Zealand’s largest trade partner by far, and the US its third largest (just behind Australia), the impacts of this global standoff will be indirect but nevertheless significant.

To estimate the impacts of a US-China trade war, as well as other tariffs imposed by the US, I use the same global model of production, trade and consumption of goods and services employed to recently calculate the impacts of the Liberation Day tariffs.

This article is republished from The Conversation under a Creative Commons license. Read the rest of the original article.