What Trump’s tariff plan could mean for NZ-China relations

There are three main reasons New Zealand should be concerned about Trump's tariff plan, writes Mengdi Zhang.

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Comment: The incoming Trump administration is likely to introduce new tariffs on China that will reverberate across the multilateral economic system. Such a policy would change the calculations of countries such as New Zealand that rely on the global trading system in their relations with the Asian superpower.

Donald Trump’s tariff policy matters to New Zealand for three reasons. First, US tariffs would negatively affect the New Zealand market and exporters. The incoming US president originally proposed tariffs of 60 percent on Chinese goods and tariffs of up to 20 percent on all imported goods. He more recently said tariffs on Chinese goods would be 10 percent.

This would not only catch major New Zealand exports to the US like beef but also affect global markets. New Zealand International Business Forum executive director Stephen Jacobi suggested this would "kill off quite a lot of trade". Similarly, Labour Party trade spokesperson and former minister Damien O’Connor said the knock-on effects of the tariffs could be as bad for New Zealand as the tariffs themselves.

Second, the policy could intensify competition between New Zealand and Australia in the US market. Whether the US would impose the same tariffs on Australian importers is of concern to New Zealand exporters. Former New Zealand trade negotiator Charles Finny argued it would be better for New Zealand if Australian exporters experienced the same treatment. In his words, "if they’re exempted, our competitive position vis a vis them, it’s going to be even worse".

Third, the policy would signal a further shift by the US away from a multilateral system that New Zealand relies on. Trump declared he would end the Indo-Pacific Economic Framework on day one of his second term and signalled the potential for a more isolationist foreign policy.

The US could reduce its international commitments and become a more challenging partner. David Capie, director of the Centre for Strategic Studies at Victoria University of Wellington, noted the coalition government’s tendency to strengthen security cooperation with the US might be troubled because of the lack of “social licence” in New Zealand.

By contrast, the Chinese government has signalled ongoing support for globalisation and for reforming global governance. This presents both opportunities and risks for New Zealand. The recent expansion of China’s visa-free policy to a number of countries including New Zealand is a gesture of openness, and contrasts markedly to Trump’s stated policies, suggesting China’s support for globalisation may be more consistent with New Zealand’s interests in free trade.

However, China’s efforts to reform global governance may not always align with New Zealand’s interests. In addition, the Chinese government and business groups will likely make more efforts to diversify their markets away from the US and create more opportunities with other countries.

We could therefore see China “turn more towards New Zealand”. This closer attention could create new business opportunities for New Zealand but also increase concerns about economic dependence on the Chinese market.

A new round of US tariffs would complicate New Zealand’s economic and security interests in its relations with China. This could result in four possible scenarios: a virtuous cycle approach where economic and security cooperation with China mutually reinforce each other; a vicious cycle approach in which closer economic ties with China intensify security concerns; a delinking approach in which economic ties with China are separated from the broader security debate; and a coexisting approach with emphases on both the positive and negative effects of China’s economic capabilities and economic ties with China for dealing with regional security issues.

The coexisting approach is the most likely outcome because New Zealand faces both opportunities and risks with China under a potential new round of Trump tariffs.

The Chinese government’s support for a free trade system and greater access to the Chinese market could provide much-needed economic opportunities given the uncertainty of the global economic outlook. Potential for overdependence on the Chinese market and the Chinese government’s plans to reform global governance, however, present risks.

Naturally, different interest groups in New Zealand would see these dynamics differently, meaning the New Zealand Government will need to continue to balance the interests of both stakeholders keen to enhance economic cooperation with China and those seeking to respond to security concerns.

Trump’s potential plan then is one that is likely to further highlight the contradictions in New Zealand’s policy toward China and intensify our differences.

This article was originally published on Newsroom.

Mengdi Zhang is a PhD candidate in International Relations and an administrator in the School of History, Philosophy, Political Science and International Relations at Te Herenga Waka—Victoria University of Wellington.


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