NEW ZEALAND BUSINESS NEWS
Empowering Kiwi Businesses
Two years into Donald Trump’s second term as US president, American tariff rates sit higher than at any point since the Smoot-Hawley tariffs of the Great Depression. The White House has imposed sweeping duties on dozens of countries, changed rates on individual goods and countries repeatedly, and left trading partners with little certainty about what will apply next. For exporters and importers anywhere in the world, the practical effect has been a trading environment harder to plan around than the system it replaced.
A 50% tariff on steel imports has protected American steel producers at the direct expense of the manufacturers who buy from them. The average US price of hot-rolled coil steel rose 52% over the past year, lifting steelmakers’ output and profits while pushing up costs for carmakers, farm equipment manufacturers, and household appliance producers.
That pattern repeats across the tariff schedule. Protection granted to one industry becomes an input cost for the next one along the chain, and the businesses furthest from the tariff wall absorb the difference.
The stated aims were to raise employment, particularly in manufacturing, shrink America’s trade and current-account deficits, and rebuild the country’s industrial base. On the evidence so far, none of the three has been delivered, and inflation has accelerated instead.
Manufacturing employment fell 1.2% in 2025, after a 0.7% decline in 2024. The US merchandise trade deficit did not fall either; it rose to $114.7 billion by August. The goods deficit with China shrank 32%, but the overall trade deficit climbed to $1.2 trillion in 2025 as imports from other countries filled the gap. Agriculture and other sectors have been hit as countries responded by sourcing from alternative suppliers.
Prices moved sharply. Gasoline rose 34%, fuel oil 74%, computer software 28%, and airfares 22%. Research from the Federal Reserve Bank of New York found that without the tariffs, US prices would have fallen slightly in 2026.
A Brookings Institution study described the tariff regime as more administratively complex and less predictable than the system before it, with little clarity on how long the measures would last or how far they would reach. A framework meant to build domestic manufacturing capacity and bargaining leverage may instead introduce costs and instability that work against those very goals.
The damage has spread well beyond China. Canada and Mexico have been through two rounds of renegotiation of the North American Free Trade Agreement. Australia and the United Kingdom were hit with higher tariffs because they were not doing enough to crack down on forced labour.
The most useful signal for exporters is that most countries have chosen not to retaliate in kind, which has limited the damage to their own economies and to the US. Global trade and growth have held up better than feared. The International Monetary Fund’s April projection was for global growth to slow from 3.5% in 2025 to 3% this year; its later figure was 3.1%, despite the war in Iran and higher fuel prices. The World Trade Organisation more than doubled its forecast for global trade growth in 2026, from 1.9% to 3.9%.
Tariffs are also unpopular with American voters, which creates a route back. If the polls hold and Republicans lose ground in the upcoming midterm elections, US politicians will be reluctant to back further increases. Lower tariffs would ease inflation and uncertainty, and the resilience already shown by international trade suggests the recovery could come faster than expected.
NZ Business News reports on the decisions, deals and numbers shaping New Zealand business — the companies making them, the policy and market conditions they work within, and what it means for the people running businesses here.