Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

What Would Happen if US Tariffs Escalated into a Trade War?

What Would Happen If US Tariffs Escalated into a Trade War?


Milford Asset Management Portfolio Manager David Lewis says the tariffs President Trump has imposed on imports of steel and aluminium into the US “are not a major issue for New Zealand. In fact, even for the US this is not a major issue.”

“At this stage, we see this as an isolated situation,” he told Ian Fraser in an online interview this week. “We see what’s happened as part of Trump’s negotiating tactics – the so-called ‘art of the deal’. We don’t see this as something that will escalate into a broader trade war.

“However, if we look at the worst case scenario, of a full-on trade war, where we assume that trade growth slows to nothing as opposed to the quite strong 5 per cent trade growth we’ve got at the moment, we estimate that could reduce New Zealand’s economic growth rate by about half – from 3 per cent at the moment to about 1.5 per cent. Would I call that a very big shock? No, I’d call that a moderate shock, especially if you compare it to the Global Financial Crisis, which was a one in 50-year event. That was a very big shock.”

David Lewis also sees some pluses along with the obvious minuses in the situation that is building around trade.

“If this was to escalate into a bigger trade war, we’d be looking closely at the exporters who’d be affected in this country and in Australia. But there would also be industries that present opportunities. Blue Scope Steel, for example, is one company in our portfolio that has a steel mill in the US. We’ve spoken to the management team there in the past week. They don’t see any material change to their business from this. If anything, they might get some higher pricing in the US.”

Asked what happens to our investment markets if the world enters a new age of protectionism following the American tariff measures, David Lewis acknowledged that “we’d be talking about higher uncertainty from that, we’d be talking about lower growth, and both of those are negatives.

“But I think the really interesting thing that sits behind that is what’s driving this potential shift to protectionism. It seems to be this more populist style of politics we saw with Brexit and the rise of Trump. And it’s feeding off broader issues like more uneven wealth distribution, low interest rates, high house prices and factors like that.

“This background picture is something that we do monitor and discuss at Milford but the key thing is that they are medium term rather than short term issues. They are not impacting on the market day to day. But they are vital things for us to understand and monitor.”

For more of David Lewis’s commentary on the impact of US tariffs on the market – please click here.


ENDS


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Land Report: Issues With Soil Degradation

An environmental report released today has found we are damaging and losing our soils and our native plants and animals. More>>

ALSO:

Water Quality Report: Cause For Optimism

National River Water Quality Trends released by Land, Air, Water Aotearoa (LAWA) this week, reveal that for all river water quality parameters monitored over a 10 year period, more sites were improving than deteriorating. More>>

ALSO:

IMF Report On NZ: Positive Economic Outlook

Minister of Finance Grant Robertson has welcomed the IMF’s Concluding Statement, released following its annual visit, which provides an independent assessment of the strength of the New Zealand economy. More>>

ALSO:

Retail Power Price: Review Panel Named

The Energy and Resources Minister Megan Woods has released the details of who will sit on an expert advisory panel which is tasked with leading a review into the price of electricity in New Zealand. More>>

ALSO:


Increasingly Disruptive Threats: Govt Cyber Security Refresh

Broadcasting, Communications and Digital Media Minister Clare Curran today announced a comprehensive refresh of New Zealand’s approach to cyber security. More>>

ALSO:


Regional Growth: Action Plan To Modernise Taranaki’s Economy

The Provincial Growth Fund (PGF) will invest up to $20 million to help future-proof the Taranaki region by diversifying its economy, creating additional jobs and leveraging off the strong base the region has established through its oil, gas and agricultural ... More>>

ALSO:

Winding Down Irrigation: Funding Ends For Crown Irrigation Investment

The Government has begun winding down public funding for large-scale irrigation through Crown Irrigation Investments Limited (CIIL), in line with the Coalition Agreement and the Confidence & Supply Agreement. More>>

ALSO: