Trade uncertainty is costly
Uncertainty is about the only predictable aspect of global trade at the moment.
As global trade uncertainty persists, unpredictable, escalated, and varied tariff rates are weighing on the global trade landscape and they are creating new market dynamics. Whether we view these impacts on global trade as short-term trends or long-term structural changes, there is a need to find ways – for countries and businesses alike – to manage and plan for uncertainty.
“Uncertainty has become the new tariff and its price is being paid across the world economy.”
The latest Global Trade Update by United Nations Trade and Development (UNCTAD) argues global economic and trade uncertainty is “raising costs, unsettling financial markets and deepening divides between countries”. Evidently (see chart below), escalating tariffs (and the threat of them) have added to global economic and trade policy uncertainty. On top of rising tariffs, longer clearance times, more complex requirements, higher landed costs, and more compliance generally from evolving trade policy, are all deepening the costs of uncertainty.
New Zealand’s trade performance over the past decade has remained robust despite heightened uncertainty
New Zealand’s international trade performance has remained relatively robust. Between 2015 and 2025 (June years), the total value of New Zealand’s exports increased from $68 billion to $109 billion. In the June 2025 quarter alone exports totalled $28.9 billion, up from the previous year and, similarly, imports also increased.
We will begin to see the effects of the increase in the United States (US) tariff rate applied on New Zealand, up to 15 percent at the start of August (on top of existing tariffs), as well as the flow-on effects from changes in tariff rates applied to other countries. The variation in tariff rates and its effects on market dynamics cuts both ways – where can we gain comparative price advantage with a lower tariff rate and where will we lose comparative price advantage with a tariff rate above the base rate of ten percent?
The full extent of such flow-on effects is still materialising. The same is true for the effects of heightened tariffs on the US domestic economy; how impactful will a potential slowdown in the consumer market be on New Zealand exports to the US? More broadly, how powerfully will this affect the global economy? Early estimates from the European Commission (EC) find unilateral US tariff hikes will hurt the US economy, reducing exports and weakening domestic demand. An initial estimate from Niven Winchester, a Professor of Economics at Auckland University of Technology, suggests New Zealand’s gross domestic product (GDP) will decline 0.15 percent from weaker US demand.
Not to be underestimated is the removal of the de minimis exemption, which previously exempted imported goods into the US valued under US$800 from duties and taxes. New Zealand is an economy of small-to-medium sized enterprises (SMEs) that will be particularly adversely affected by this.
As these impacts materialise, countries and businesses need to be analysing their effects closely as they may present both opportunities as well as challenges.
Navigating changing trade dynamics and flow-on effects from global uncertainty.
Varied tariff rates and unpredictable trade policies are shifting relative competitiveness across markets and countries and changing trade dynamics. Reactionary responses are inevitable but, in parallel, countries and businesses can look beyond the near-term and consider their ideal position in the coming years.
The starting point should be the existing architecture in place. For New Zealand, and other like-minded countries, this means analysing the current utilisation of existing free trade agreements (FTAs). As competitiveness shifts, new opportunities may become apparent within these established frameworks. Around 70 percent of New Zealand’s total exports are already with countries that we share an FTA with. These are most notably concentrated in China which accounts for around 20 percent of our exports. But, importantly, around 38 percent of our exports are to the European Union (EU) and parties to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Both are relatively “new” agreements, and the CPTPP alone is estimated to account for approximately 15 percent of global trade. The effects of tariffs will have far reaching implications for the diverse markets within both member groupings. Strengthening connections and exchanges within these existing frameworks will expand their utilisation and support greater resilience in highly uncertain times.