Its official (according to the best NZ estimates): Trump's Tariffs will boost NZ's GDP. Thank goodness The Donald is helping lift NZ out of stagnation.
- rmacculloch
- 19 hours ago
- 2 min read
Estimating the effects of tariffs on different countries' GDP is a difficult thing to do, because there are so many flow-on effects. Overall, the strongly held view by economists is they will lower world productivity. However, as a consequence of the Trump tariffs, and the retaliatory moves by other countries, there are winners & losers, even though the average effect on GDP is going to be negative. So how does NZ come out of all of this? It turns out the best estimates in the country come from Professor Niven Winchester at the Auckland University of Technology. He has used a global model of the production, trade & consumption of goods & services known as a "computable general equilibrium model" to evaluate the impact of the Trump tariffs on countries throughout the world, including New Zealand. And it turns out that NZ's GDP per capita will rise by around $US 400. That's about $NZ 700 per person. Let's hand it to Niven. What a genius.
In the media that have so far reported his estimates, there is no intuition given as to why NZ is expected to do so well out of the Trump Tariffs. So here is my best guess. Of course, the tariffs may hurt things like our beef exports to the US, though they are not particularly large. And NZ has a low US tariff rate, kindly set by the White House at only 10%. However what is probably happening is that many countries will find it harder to sell their products into the US market, since Americans may be facing higher prices for them now. So demand from US consumers will drop for many such goods. To the extent overseas producers try to increase sales by selling more into markets like the NZ one, then we will become more spoilt for choice and pay lower prices. Even better, since NZ agricultural sales into the US push up our local food prices (since free trade means prices are similar everywhere - its called the "law of one price") then to the extent that market gets harder, the cost of food may even come down in this country. Instead of us having to pay New York city prices for our rack of lamb, we can pay a price that better reflects how NZ produces enough food to feed 40 million people, and so exports most of it. Less money for our agricultural industry, but a better deal for Kiwis at the supermarket. An oversupply of food in NZ. How wonderful.
All in all, New Zealanders should celebrate the Trump tariffs and stay out of the trade war that is breaking out. Who can argue with Niven's “computable general equilibrium model”. It may even be powered by AI. So yes, we've all got a lot to be grateful for - grateful to our friends, the Americans. (And please spare me hate mail for not coming to the enlightened position about how evil The Donald is, and how he wants to blow up the world).
New Zealand The World's Biggest Winner from the Trump Tariffs
Effect on GDP per capita
