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Stephen Jacobi: New Zealand International Business Forum Executive Director on Donald Trump introducing new tariffs for NZ · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk zed be
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  Speaker 1: follow this and our Wide Ranger podcasts now on iHeartRadio.
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  Speaker 2: The biggest story in New Zealand at the moment. New
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  Speaker 2: Zealand isn't being exempted from Donald trump sweeping tariff planned.
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  Speaker 2: The US President has announced ten percent tariff's on almost
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  Speaker 2: all imports to the United States. To discuss this further,
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  Speaker 2: we're joined by Stephen Jacobe. He's a former diplomat, policy
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  Speaker 2: advisor and Industry Associate Association CEO. He is well known
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  Speaker 2: as an expert on trade and economic issues in New
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  Speaker 2: Zealand and joins us now.
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  Speaker 3: Very good afternoon, Stephen, Yes, hello to you.
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  Speaker 4: Now, Stephen, very basically because a lot of people, I
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  Speaker 4: don't think understand tariff's at all. For people who might
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  Speaker 4: be an idiot and don't get it, how do tariff's work,
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  Speaker 4: Where are they applied, who pays for them? And where
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  Speaker 4: does the money collected go.
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  Speaker 3: So, when New Zealand exports are product to the United States,
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  Speaker 3: for instance, the United States government may or may not
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  Speaker 3: charge a tariff a duty a percentage of the goods
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  Speaker 3: value as it enters the country, and that is paid
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  Speaker 3: for by the importer. Of the products not paid by
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  Speaker 3: the exporter. It's paid by the importer, and the importer
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  Speaker 3: generally passes that cost on to the purchaser of that
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  Speaker 3: good and on to the final consumer. So in this example,
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  Speaker 3: the tariff is attack that's paid for by consumers in
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  Speaker 3: the United States.
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  Speaker 4: Now, we hear a lot about the negative parts of
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  Speaker 4: tariffs from our perspective, but it's not random. Can you
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  Speaker 4: steal man the Trump administration's reasons for putting these tariffs
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  Speaker 4: in place.
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  Speaker 3: Well, if you read through the nine pages or so
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  Speaker 3: of the executive order released by the President, you'll see
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  Speaker 3: quite a lot of justification for this, primarily because he
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  Speaker 3: considers that imbalances an international trade of heated a national
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  Speaker 3: security problem for the United States. So this is, you know,
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  Speaker 3: our exports of beef for McDonald's is causing a massive
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  Speaker 3: national security problem for the United States, and therefore he
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  Speaker 3: is being led to put in place actions to correct this,
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  Speaker 3: which will in the process bring more business and manufacturing
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  Speaker 3: to establish itself in the United States and boost the economy.
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  Speaker 3: You know, there are lots of aspects to this argument,
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  Speaker 3: but that's the central one.
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  Speaker 4: Because you can see it if you had a company
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  Speaker 4: that was manufacturing cars in the United States, and then
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  Speaker 4: they moved their factory to Mexico for the cheaper labor,
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  Speaker 4: and then just selling the cars back to America. You
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  Speaker 4: can see how that would be gutting for you know,
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  Speaker 4: the car manufacturing industry in America.
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  Speaker 3: Well, of course that's not quite the way it works,
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  Speaker 3: because what happens in that particular example is that, yes,
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  Speaker 3: some things are outsourced for production in Mexico, but in
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  Speaker 3: fact what Mexico is doing is they are making parts
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  Speaker 3: for the final car that is constructed in the United States.
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  Speaker 3: In fact, parts flow back and forth across the border
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  Speaker 3: for a variety of reasons. You know, I guess lower
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  Speaker 3: cost production, sure, but also the ability to have very
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  Speaker 3: long runs to reduce the unit cost of things produced.
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  Speaker 3: So you know, to say that you can make everything
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  Speaker 3: in one country today is actually a pretty tall order.
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  Speaker 3: And then the motor vehicle example is pretty much the case.
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  Speaker 2: Here.
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  Speaker 3: You've got products moving all over North America to make
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  Speaker 3: these cars. If you actually restrict that, you raise the
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  Speaker 3: cost of manufacturing in the United States, you make them
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  Speaker 3: unappealing an attractive, unaffordable to ess consumers, and they either
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  Speaker 3: don't buy a car or buy from somewhere else.
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  Speaker 4: But some car manufacturers have moved their plants out of
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  Speaker 4: the United States because it's cheaper to make the cars
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  Speaker 4: outside the United States. That's true, though, wasn't it.
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  Speaker 3: They have moved part of the manufacturing process out of
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  Speaker 3: the United States, that's right. But they have retained a
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  Speaker 3: lot of manufacturing in the United States so they can
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  Speaker 3: have an integrated manufacturing across North America.
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  Speaker 4: So that hasn't been responsible for the losses and jobs
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  Speaker 4: in manufacturing in America.
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  Speaker 3: Well, I guess President Trump would argue that it has,
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  Speaker 3: but of course also be argued that has actually preserved
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  Speaker 3: jobs and created new ones by making cars that overall
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  Speaker 3: are cheaper.
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  Speaker 2: Stephen, there's a question that's come via our text machine here,
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  Speaker 2: and I understand some countries have had this applied to
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  Speaker 2: them with these new terriffs. But the question is will
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  Speaker 2: new towers apply to small individual purchases from we retail
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  Speaker 2: websites to a private individual. Currently they can import US
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  Speaker 2: eight hundred dollars. Do we know that level of detail?
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  Speaker 3: Yen. Yeah, that's called a dem minimus transaction. And this
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  Speaker 3: is in the United States, right, So consumers in those
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  Speaker 3: states can buy these and import them. You know, it's
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  Speaker 3: the sort of thing you might buy from an international
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  Speaker 3: you know, you know, website or something. Previously they were exempt,
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  Speaker 3: but now they are going to be charged to full duty.
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  Speaker 4: We're talking to Steven Jacobe, former diplomat and trade experts
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  Speaker 4: from a New Zealand perspective. How much does our low
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  Speaker 4: dollar offset the impact of these ten percent tariffs.
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  Speaker 3: You know, to a certain extent, that's right, you know,
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  Speaker 3: appreciation depreciation and the dollar which moves around can offset
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  Speaker 3: some of this. And this tariff has been put on
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  Speaker 3: at ten percent right for New Zealand, which is at
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  Speaker 3: the low lowest end of the scale that they've adopted.
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  Speaker 3: And you might have, you know, even up to a
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  Speaker 3: five percent swing in the exchange rate that would have
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  Speaker 3: an effect here. But bear in mind, by the way,
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  Speaker 3: it's an additional ten percent tariff, it's not just ten percent.
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  Speaker 3: So and of course a lot of our exports have
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  Speaker 3: been going to the United States duty free, but in
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  Speaker 3: some cases we do pay a tariff, generally not a
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  Speaker 3: high tariff, except on some agricultural items. So some aspects
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  Speaker 3: of dairy trade, for example s l Asbury high tariffs
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  Speaker 3: and sometimes we trade over those twerts. We're going to
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  Speaker 3: phase ten percent on top now, so the level of
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  Speaker 3: pain will be felt differently across different sectors. And the
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  Speaker 3: other aspect to bear in mind is that some of
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  Speaker 3: our competitors in the US market are being taxed more
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  Speaker 3: than US. So, for example, the European Union is being
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  Speaker 3: taxed an additional tariff of twenty percent. That's going to
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  Speaker 3: be significant for our wine exports, for.
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  Speaker 2: Example, as it's the importer that pays the tariff. Steve
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  Speaker 2: the no New Zealand export is likely to drop the
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  Speaker 2: export prices to compensate the importer or is it a
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  Speaker 2: case of living with a possible reduction that demand?
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  Speaker 3: Yeah, well this is this is I mean, both is
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  Speaker 3: probably correct. Some exporters will want to help their you know,
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  Speaker 3: their distributors in the United States to keep you know,
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  Speaker 3: price increases to a reasonable level. They may want to
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  Speaker 3: share the pain, for example, or they might want to
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  Speaker 3: they might want to seek to divert their you know,
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  Speaker 3: exports off to other markets, or they might just suck
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  Speaker 3: it up. So you know, it's going to vary across
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  Speaker 3: different sectors according to different relationships and how the market reacts.
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  Speaker 3: I mean, because of course you know, one big factor
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  Speaker 3: here is is you know, how our competitors are being
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  Speaker 3: treated our foreign competitors. But the other factor is can
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  Speaker 3: the US you know, industry step up and supply the
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  Speaker 3: products that we all have been supplying in all cases
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  Speaker 3: is most unlikely to be the case. You take our
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  Speaker 3: largest export beef into McDonald's, that's one point eight billion
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  Speaker 3: dollars worth of exports, plays of very small tariff at
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  Speaker 3: the moment. It might be subject to a plus ten percent,
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  Speaker 3: but it's being part of a manifact of a food
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  Speaker 3: processing chain in the United States. So how that exactly
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  Speaker 3: works out will be very interesting to see.
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  Speaker 4: Now, tariff's on a new thing. We're talking about the
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  Speaker 4: lot because the US is the biggest economy in the world.
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  Speaker 4: But Canada has had some big tariffs on New Zealand
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  Speaker 4: and the EU has. Are we still taking Canada to
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  Speaker 4: court with the when we take in Canada to the
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  Speaker 4: wto the World Trade Organization over their tariffs on us.
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  Speaker 3: That's right, that's right. They haven't implemented their undertakings to
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  Speaker 3: US in the context of the TPP Trade Agreement, and
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  Speaker 3: so we're taking them to dispute settlement process. But you know,
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  Speaker 3: that's kind of. It's an important thing and a big thing,
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  Speaker 3: and we should be doing it, but it's a small
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  Speaker 3: thing compared to what we're seeing in the United States
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  Speaker 3: at the moment. You know, Canada is not putting tariffs
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  Speaker 3: on us on all products. They should be meeting their
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  Speaker 3: international obligations. What the United States is doing is quite
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  Speaker 3: a lot more. In the case of the EU that
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  Speaker 3: you mentioned. Of course, we've got a new trade agreement
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  Speaker 3: with the EU that has reduced some tariffs, but not
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  Speaker 3: all tariffs. And you know, I think that trade agreement
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  Speaker 3: and other ones we have, including TPP or CPTPP as
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  Speaker 3: it's called. Now, are we going to become more important
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  Speaker 3: to us as we move forward into this new kind
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  Speaker 3: of tariff world that we're seeing open up before our eyes.
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  Speaker 4: Now, America has a huge amount of debt, and the
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  Speaker 4: debt is growing all the time, and they look around
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  Speaker 4: the world and see these deficits of trade. And if
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  Speaker 4: you're the Trump administration, you believe that America is being
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  Speaker 4: ripped off. Is there any truth to that? Have they
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  Speaker 4: been basically subsidizing the rest of the world as has
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  Speaker 4: been suggested?
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  Speaker 3: Well, I don't think so, because after all, they have
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  Speaker 3: made sovereign decisions to lower their tariffs in the context
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  Speaker 3: of trade agreements, in the context of international trade negotiations.
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  Speaker 3: These deals have been done and they have been ratified
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  Speaker 3: by the Congress. There have been processes around these things.
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  Speaker 3: You know. You know, it's true that, I mean, it
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  Speaker 3: is the case and in some areas their trading partners
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  Speaker 3: impose greater tariffs on them than they impose on their
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  Speaker 3: trading partner. In fact, we've got a few things like
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  Speaker 3: that for US. But you know, the way to deal
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  Speaker 3: with these things is to negotiate the reduction of tariffs
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  Speaker 3: and other trade barriers in the context of trade agreements.
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  Speaker 3: We have been seeking a trade agreement with the United
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  Speaker 3: States for a long time, as you know, so I
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  Speaker 3: don't think that really, you know, holds things up. And
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  Speaker 3: you know, when you think about this business of who's
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  Speaker 3: ripping off who I mean our tariff applied tariff right
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  Speaker 3: to US goods entering news in it is one point
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  Speaker 3: eight percent, not betwenty percent that the US administration claims
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  Speaker 3: is being applied.
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  Speaker 4: Yeah, they can confuse with zest on that they are
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  Speaker 4: they adding the GST to that is that what's going.
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  Speaker 3: On there, you know, to be perfect to think. I
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  Speaker 3: think it's a lot simpler than that. They have simply
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  Speaker 3: looked at the trade deficit. Their assessment of the trade
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  Speaker 3: deficit that we have with the United States, which is
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  Speaker 3: quite small and according to American figures, about one point
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  Speaker 3: three billion dollars, and they have divided it by the
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  Speaker 3: total by total trade between New Zealand and the United States,
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  Speaker 3: and they've come out with a figure close to twenty percent.
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  Speaker 3: I don't really think they've taken the GSD into it.
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  Speaker 4: Do we have the ability to cr We got the
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  Speaker 4: access to correct them on things like that and maybe
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  Speaker 4: get a TARFF changed.
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  Speaker 3: Well. The Executive Order says that makes clear that yes,
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  Speaker 3: there is a room for negotiation if countries bring their
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  Speaker 3: trade regimes into a line with that of the United States.
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  Speaker 3: In the United States to be prepared to consider, you know,
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  Speaker 3: decreasing or limiting the application of these towers. But now
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  Speaker 3: what's going to see, of course, is one hundred and
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  Speaker 3: eighty five trading partners around the world or seeking to
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  Speaker 3: try to do that. We do need to, we do need.
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  Speaker 4: We need we need to get over there right now
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  Speaker 4: and start knocking on the door and getting in the
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  Speaker 4: queue and getting hurt.
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  Speaker 3: But bear in mind, you know, having said that, and
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  Speaker 3: you know, tariffs are mad and we have it's going
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  Speaker 3: to have a it's going to be painful for news
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  Speaker 3: in and exports, no doubt. But we are in the
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  Speaker 3: least terrified group. So there are others that have got
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  Speaker 3: much greater problems than us, and including a number of
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  Speaker 3: you know, you know, substantial economies like the European Union
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  Speaker 3: twenty percent, or in India twenty seven percent, you know,
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  Speaker 3: Israel seventeen percent, of staunch ally of the United States,
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  Speaker 3: a number of ones in Southeast Asia, and here I say,
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  Speaker 3: even in the Pacific, why did.
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  Speaker 4: They go to They went to Cambodia pretty hard as well,
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  Speaker 4: forty nine percent.
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  Speaker 3: I mean for a least developed economy like Cambodia. Frankly
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  Speaker 3: that I find that splicable when the rest of the
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  Speaker 3: world is giving you know, duty free access of a
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  Speaker 3: lot of these countries. But there's also Fiji thirty two percent,
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  Speaker 3: in Vanuatu twenty three percent. They're even taxing the Norfolk
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  Speaker 3: Island at twenty nine percent. I don't know what in
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  Speaker 3: earth Norfolk Island that much.
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  Speaker 2: Stephen, fascinating times and thank you very much for giving
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  Speaker 2: us some time today. Really appreciate it.
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  Speaker 3: You're very welcome. More to watch on the space.
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  Speaker 2: Absolutely there is. That is Stephen Jacoby, Executive director of
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  Speaker 2: the International Business Forum, an international trade specialist.
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