NZUS Council Executive Director Fiona Cooper recently addressed the Nelson branch of the New Zealand Institute of International Affairs (NZIIA) on the state of the NZ/US relationship in the early weeks of President Trump’s second administration.
Fiona’s address noted that while we are navigating a complex and rapidly-shifting global landscape, the foundation of the NZ/US partnership remains strong.
Highlights from her speech include:
- NZ/US Trade & Investment: The United States is one of New Zealand’s most significant trade and investment partners. Over the past year, it has overtaken Australia to become New Zealand’s second-largest export market after China. Fiona noted, “The US is vitally important to the New Zealand economy… Total two-way trade was worth around NZ$27 billion, with New Zealand goods exports to the USA worth just under $8.8 billion” (year to September 2024).
- Bilateral Collaboration: Fiona highlighted, “New Zealand and the USA have collaborated in a wide range of areas, from foreign policy, trade, defence, and security to police matters, immigration, Customs, and increasingly science, innovation, technology, and the fast-growing space sector.”
- US Trade Policy & Tariffs: While President Trump’s trade policies, including new tariffs, introduce uncertainties, it is unlikely that New Zealand is a primary target. “It is worth noting that New Zealand was not named as a target in the “Fair and Reciprocal Plan”… New Zealand is not an obvious target for reciprocal tariffs. We have generally low tariff rates on imports from the United States”.
- New Zealand’s Value Proposition: As Fiona emphasised, “New Zealand has been a strong supporter of the rules-based international trading system for decades. We’ve long argued for the benefits of reducing tariffs rather than increasing them. However, the usual arguments against tariffs are unlikely to fly with the US Administration.” Instead, New Zealand must highlight its high-quality, innovative exports and strong reputation among US consumers and businesses, and the fair and balanced trade relationship.
- Emerging Opportunities: Despite the evolving trade landscape, there may be opportunities for New Zealand businesses. Fiona remarked, “Perhaps there will be some upside opportunities for New Zealand businesses if the US economic growth rate is boosted by President Trump’s policies, including deregulation and tax policy changes.”
The NZUS Council remains dedicated to advancing the bilateral relationship with the US. As Fiona concluded, “New Zealand has a great story to tell the US. The NZUS Council looks forward to working with both the New Zealand and US governments to continue to increase trade and investment and grow returns for both countries.”
For further insights and updates as we navigate this dynamic period in bilateral relationship, keep an eye on our website and LinkedIn.
Read Fiona’s Full Speech below.
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Address to the NZIIA Nelson Branch
Thursday 20 February 2025
Fiona Cooper, NZUS Council Executive Director
Tēnā koutou katoa
Thank you John. Good afternoon everyone.
Thank you for the invitation to speak with you today.
I’m delighted to be back in your beautiful city and to have this opportunity to discuss the bilateral relationship with the USA. It has been ten years since I last addressed this group on this topic. A lot has changed since then.
When Oke invited me last June to speak with you today, we did not know what the outcome of the US election would be. But here we are.
We are certainly living in interesting times since President Trump took office nearly five weeks ago. There has been an outpouring of new US policies, and we are still working our way through what they all mean for New Zealand.
Today I’d like to talk about the fundamental strength of the bilateral relationship with the US and then consider some of the policy areas where there are risks and opportunities for New Zealand, and what New Zealand can do in response.
First, I should say a quick word about our Council.
We are a non-partisan and non-government organisation founded in 2001. We are focused on advancing New Zealand’s interests in a strong bilateral relationship with the USA. We are funded by New Zealand businesses, academia, and government. We communicate the importance of the bilateral relationship, as I hope to do for you today, provide platforms to advance opportunities for New Zealanders with the USA, and build supportive constituencies for New Zealand in the USA.
First let’s start with the big picture. Why does the relationship with the USA Matter?
According to the Government’s Foreign Policy Reset last year, which I am sure this group would have taken note of, New Zealand needs to manage risks in an increasingly complex and contested world.
The Reset identified some important changing patterns in international relations, such as a move from rules to power, and a shift from economics to security.
One of the Government’s proposed responses to these and other global trends, is a renewed attentiveness to traditional like-minded partners, including the USA as well as Australia, Canada and the UK who together constitute the Five Eyes partnership.
The Foreign Policy Reset identified the USA as New Zealand’s most powerful international partner and fundamental to the underpinning and functioning of the international rules based system on which NZ depends. The USA’s actions in the world affect New Zealand’s prosperity, security and sustainability. So there is a lot at stake in New Zealand’s relationship with the USA.
The good news is that the bilateral relationship between New Zealand and the USA has been in excellent shape for many years. The “bumps in the road” back in the 1980s are distant memories. The relationship was fully normalised with two key bilateral agreements signed in 2010 and 2011, and it’s been onwards and upwards since then.
Today, at the official level, New Zealand places a high value on the relationship with the USA, as was made clear in the Foreign Policy Reset. We share a strong and longstanding friendship based on shared interests and a commitment to promoting a free, democratic, secure and prosperous world. That is not to say that we will always agree on the best way to achieve those goals, and I will say more about that later.
In recent years, including during President Trump’s first term in office, New Zealand and the USA have collaborated in a wide range of areas, from foreign policy, trade, defence and security to police matters, immigration, Customs and increasingly science, innovation, technology and the fast growing space sector.
This high level of cooperation has created a strong platform as New Zealand sets about building relationships with the new Trump Administration.
The New Zealand Government has signalled that it is committed to further strengthening the relationship with the USA. It was encouraging that Prime Minister Luxon had a very cordial phone call with President Trump within a week of his election win.
We are not starting from scratch with this Administration. Our Minister of Foreign Affairs Rt Hon Winston Peters worked well with the first Trump Administration. I expect he will want to visit the US as soon as he can, as will other Ministers once their counterparts are confirmed and in place.
We are also lucky to have HE Rosemary Banks as our Ambassador in Washington DC, as she too worked with President Trump’s first Administration. In between those two postings, Rosemary was the Chair of the NZUS Council, and I imagine she is well known to many of you.
In short, I believe we are as well positioned as we can be with the US at this early stage.
It is no surprise given the composition of our membership that the NZUS Council is particularly focussed on the economic aspects of the relationship with the US.
The US is one of New Zealand’s most important trading partners. The two-way trade and investment relationship has shown strong growth in recent years. And we hope that will continue. Over the last 12 months, the US has overtaken Australia to become New Zealand’s second largest export market after China.
The US is our third largest trading partner overall (counting exports and imports). And the US is our second largest source of foreign investment after Australia. Thus the US is vitally important to the New Zealand economy.
In the year to September 2024, total two way trade was worth around NZ$27 billion with New Zealand goods exports to the USA worth just under $8.8 billion.
The US is New Zealand’s largest market for beef and wine, no doubt including a lot of fine Marlborough wine. It is an important market for many other products including other meat, dairy, honey, casein, fish, fruit and wood, as well as mechanical appliances, medical instruments, electrical machinery, pharmaceuticals and aluminium and steel products.
Goods trade between New Zealand and the US has been pretty well balanced over the years. At times the trade surplus has been in the US’ favour, and sometimes in New Zealand’s. We currently have a small goods trade surplus with the US (NZ$1.62 billion). This is very small especially when compared with other much larger trading partners.
The US is also a fast-growing market for New Zealand services exports, which were worth nearly $7 billion in the year to September 2024. The US is now our largest services market taking nearly a quarter our total services exports.
That’s all well and good but as we all know President Trump is intent on shaking things up at home and abroad. He is not a fan of the multilateral rules-based trading system and that is a challenging proposition for a small trade-dependent country like New Zealand. And there are some potential trade policy challenges on the not-so-distant horizon.
President Trump campaigned on the promise of introducing new tariffs on imported goods in the belief that other countries would be willing to pay additional tariffs in order to maintain access to the large and lucrative US market. That promise is in the process of being implemented.
On his first day in office, President Trump announced his America First Trade Policy. It focused on addressing perceived unfair trade practices and unbalanced trade by USA’s trading partners.
It involves an extensive range of actions including reviews, assessments and reports to be completed by various agencies across the Administration by April 1st.
Two weeks later, President Trump announced new tariffs on China, Mexico and Canada, related to his concerns about the flow of illegal migrants and fentanyl into the USA.
A new 10% tariff on imports from China (on top of any existing tariffs) entered into force on February 4th, triggering a round of retaliatory tariffs on US imports and other trade actions by China.
A new 25% tariff on goods imported from Mexico and Canada (10% for Canadian oil and energy imports) was also announced. Those tariffs were suspended for 30 days pending bilateral discussions. It is not yet clear what will happen at the end of the 30 day period in early March. Fisher & Paykel Healthcare expects that these tariffs, if implemented, would impact on their manufacturing operation in Mexico.
Last week President Trump re-imposed a 10% tariff on aluminium imports and a 25% tariff on steel imports from all countries including New Zealand. These tariffs are expected to enter into force on March 12th. China and the EU have already announced retaliatory trade measures.
In the year to September 2024, New Zealand’s exports of iron, steel and aluminium to the US were worth over $42 million. We know US customers greatly value New Zealand’s high purity aluminium for use in their manufacturing sector.
Whereas during President Trump’s first term, some countries received a waiver from his steel and aluminium tariffs, this time all countries have been captured. It remains to be seen whether any nations will be successful in securing an exemption this time.
We will be keeping a close eye on these tariff proposals as we need more detail to understand which products will be affected. We encourage any affected businesses to look at the details as they emerge and seek advice from New Zealand Trade and Enterprise and business organisations like the NZUS Council as needed.
During his election campaign, President Trump spoke of wanting to introduce global tariffs, affecting all countries. This intention appears to have evolved to a focus on reciprocal tariffs to “even out” tariff rates with the rest of the world and reduce America’s trade deficit.
According to his “Fair and Reciprocal Plan” for trade released last week, the US plans to target countries that apply a higher tariff on imports from the US than is currently levied on their products going into the US. The US will look to increase their tariffs accordingly. The President has mentioned he is looking at semiconductors, cars and pharmaceuticals amongst other products.
President Trump also plans to target what he sees as unfair taxes (including Value Added Taxes in some countries), subsidies, non-tariff barriers, unfair exchange rates and any other “unfair and non-reciprocal” policies that are deemed to impact on US exports.
This is a wide remit with a short timeframe and has the potential to affect many countries, but we do not yet know which ones. US government agencies have been tasked with preparing advice on these tariffs, with their reports due to be on the President’s desk by April 1st.
We will be following these developments closely. It is worth noting that New Zealand was not named as a target in the “Fair and Reciprocal Plan”.
In my view, New Zealand is not an obvious target for reciprocal tariffs. We have generally low tariff rates on imports from the United States. This was acknowledged last year by the Office of the US Trade Representative in their annual National Trade Estimates Report on Foreign Trade Barriers.
That report noted that New Zealand’s average Most Favoured Nation (MFN) applied tariff rate was less than 2% in 2022. This compares with an average weighted applied tariff of 4.2% applied by the US to New Zealand imports according to a recent NZ analysis[1]. The USTR report also noted that New Zealand applied a zero per cent duty on the majority of tariff lines for imports including both agricultural and non-agricultural products.
Another point in New Zealand’s favour is that our version of a VAT – the Goods & Services Tax – is non-discriminatory and applies equally to locally produced goods and imports.
I’m sure the New Zealand Embassy in Washington DC will be making these points to the Administration as they conduct their analysis.
However, even if New Zealand is not directly targeted for other new tariffs, there are likely to be second order effects from US tariff increases on their other trading partners that could be problematic for New Zealand.
Any new tariffs are expected to be inflationary which may impact on US market demand, and the tariffs could also impact on demand in third country markets. What will happen to any surplus production in the EU and China that is displaced by US tariffs? Will there be widespread retaliatory tariff measures taken by affected US trading partners and what impact will that have on global trade patterns and the WTO?
These risks create further uncertainty and turbulence for NZ exporters. These matters are beyond our control and will need to be navigated as best we can.
On the other hand, it is worth thinking about potential market opportunities as well as risks. Perhaps there will be some upside opportunities for New Zealand businesses if the US economic growth rate is boosted by President Trump’s policies, including deregulation and tax policy changes which he campaigned on. We shall have to wait and see how this plays out.
In the face of all this uncertainty and risk, what can New Zealand do?
Friends do not always agree, and no doubt there will be times when New Zealand and the US take different a view on an issue. This occurred during the first Trump Administration (such as on the merits of the Trans-Pacific Partnership trade agreement, and the imposition of unilateral steel tariffs) but we got through it and the bilateral relationship continued to thrive.
Inevitably the latest US tariff announcements and other proposed policy changes, and the speed with which they are happening, creates uncertainty in the business environment in New Zealand and around the world, and a degree of nervousness about what might come next.
We have to weigh up New Zealand’s interests when it comes to both bilateral and global issues, and advocate according to those interests.
When issues are moving so quickly, escalating one minute and de-escalating the next, it is prudent for us to take a deep breath and observe the developments closely to see what it means for New Zealand. There is nothing to be gained by public finger wagging, and we can’t bark at every passing car.
At a government level and at the level of individual businesses, we need to gather as much information as we can and assess the implications for our interests and act accordingly.
In the event that our trade or other interests are impacted by US policy decisions, New Zealand has agency as a sovereign nation to promote and protect our interests. This is part and parcel of the cut and thrust of international relations. We cooperate where our interests align and protect our interests and speak up where they diverge.
Businesses are already working on risk mitigation strategies, building up their relationships with US customers and companies in their international supply chains, as well as reviewing their customer contracts and shipping strategies and undertaking contingency planning.
The key will be for New Zealand to build strong relationships with key US decision makers in order to establish good lines of communication so that each side understands where the other is coming from. The New Zealand Embassy is working hard to build the connections we need to be able to convey our views in Washington DC.
We also need to marshal our arguments. New Zealand has been a strong supporter of the rules based international trading system for decades. We’ve long argued for the benefits of reducing tariffs rather than increasing them. However the usual arguments against tariffs, that they are inflationary and hurt consumers in the short term and make the protected local producers less efficient in the longer term, are unlikely to fly with the US Administration.
Instead we can share the New Zealand value proposition with them. We can remind the US that New Zealand exports of primary products, technology products including health tech, security tech, and space tech amongst many others and specialised manufacturing products, as well as our services exports, have a strong reputation in the US for being high quality and innovative that meet the needs of US consumers and businesses. New Zealand has a great story to share with the new Administration. The NZUS Council looks forward to doing that when we take a business delegation to the US later this year.
So what is the outlook for bilateral relations?
Bear in mind we are only barely five weeks into the new Trump Administration. Several Cabinet-level appointments have yet to be confirmed as well as a large number of other senior staff across US agencies.
There is uncertainty about what may lie ahead. But overall I think New Zealand is as well positioned as we can be in these early days of the second Trump Administration.
We have a strong bilateral relationship, with reciprocal and well-balanced trade and a valued investment relationship, and we want this to continue. Our applied tariff rates are very low by world standards and our GST system is not discriminatory.
We have good connections in Washington DC and our high-quality, innovative and safe exports continue to be desired by US consumers and manufacturers. We have record levels of visitors between New Zealand and the USA, further cementing people to people connections across both countries.
New Zealand has a great story to tell the US. The NZUS Council looks forward to working with both the New Zealand and US governments to continue to increase trade and investment and grow returns for both countries.
That’s the plan, now watch this space!
Thank you for your attention.
[1] “Research note: How might New Zealand fare if the US considers reciprocal trade measures?”, dated 11 February 2025 by New Zealand economist John Ballingall, Sense Partners.