New Zealand was receiving tariffs at 10%, but the higher rates of other countries risk turning back into the world’s world trade war, Luxon said.
New Zealand has changed President Donald Trump’s diplomatic language on tariffs from a relief that he fled at the lower end (10%) rate to condemn higher tariffs on other countries.
Prime Minister Christopher Luxon read a statement prepared to reporters before the Cabinet meeting. There he warned of the potential consequences of what he called “a deep change in the global economic situation.”
“We’ve all seen the immediate impact on the balance of Kiwisabah (New Zealand’s Contribution-Formed Retirement Scheme), but it’s broader than that. It’s hampering growth prospects when the global economy needs certainty and trust, not uncertainty,” he said.
“What I am actually concerned about is the transition from agreed rules and the risk of actually returning to the World Trade War.
“Frankly, trade wars are not anyone’s interest. It will slow global growth, hurt jobs, and reduce the amount of money in your wallet.”
Trade diversion concerns
Meanwhile, Finance Minister Nicole Willis held a press conference to lay out the government’s views in the wake of Trump’s move, saying the biggest impact on New Zealand was not from tariffs on exports to the US, but particularly from other countries that have hit China’s far higher tariff rates.
“Asia, including Australia, accounts for 70% of New Zealand’s international trade,” she noted.
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“Many economies here have a major exposure to the new US tariff regime and export large quantities of goods to the US, so there is a risk of slow growth in the region.
“If retaliatory tariffs are imposed and the situation escalates, there will be further impacts on the growth of these countries and therefore potentially affects the demand for New Zealand products,” she said.
It could also lead to Asian-made products for the US being dumped into another market where New Zealand competes. This reduces the prices of New Zealand exports.
Willis admitted there could be some positive effects, including a fall in import prices for some products, including oil.
New Zealand’s floating exchange rates could mitigate some of the worst effects as the dollar weakens and New Zealand’s exports are becoming more competitive, but increase the prices of imports.
“All of these factors create risks for the New Zealand economy,” she said. “And this happens as if we’re gathering positive momentum and recovering from a period of high inflation and high interest rates.”
The NZX50 became its biggest day fall since the start of the Covid-19 pandemic on April 7, 2025, following global fallout from US tariffs. Source: NZX
Willis is expected to provide the federal budget on May 22, and the Treasury is in a hurry to adjust its forecasts to accommodate the changes.
In the last six months’ update, partner countries were projected to grow to 2.5% until June 2026, but Willis said the initial rating is now close to 2%. And while global inflation was projected to be around 2.5% over the same period, Trump’s policy makes the Treasury feel that it could rise by half.
Higher interest rates mean higher borrowing costs and spend less money on the government, but Willis showed that he can’t say anything more until the budget is announced later this month.
However, there was no chance that the government’s long-term plan she said would have been major revisions.
“We are confident that we can stick to the operational allowances we negotiated previously. The intention to return to the surplus in 2028 remains the right thing to do.”
New Zealand remained suitable to survive the coming storm, Willis said.
“Investors and businesses will continue to have confidence in us in a volatile world. We are a safe haven with a stable macroeconomic environment, a growth-promoting government and a proactive global relationship sign.
When asked if she had any opinions on Trump’s trade policies, she said New Zealand “continued to be a country that represents the value of free trade.”
The Reserve Bank of New Zealand is scheduled to announce the official cash rate (OCR) that will affect mortgages on April 9th. Willis said whether it was appropriate to implement fiscal stimulus packages by significantly lowering interest rates.
