As a new day dawns after US President Donald Trump’s Liberation Day tariff reveal, investors have been left scratching their heads as to what it all means for global markets.
New Zealand’s S&P/NZX 50 index fared better than others as it edged up 0.2% on Thursday, having slid as much as 1.7% in the immediate aftermath of the announcement. Japan’s Nikkei 225 wore a heavier blow, falling 2.7%, while Australia’s S&P/ASX 200 index declined 0.9%.
Westpac New Zealand chief economist Kelly Eckhold estimates the 10% tariff regime will cost domestic exporters about $900 million a year in lost earnings, with the red meat and wine industries exposed to the world’s biggest economy.
“It’s important to keep in mind that this direct impact is very much an upper limit,” Eckhold said in a note. “There will be offsets in terms of the end impact, as there will likely be some scope for exporters to increase their prices to US customers, or to utilise transfer pricing arrangements.”
For domestic investors, that puts the likes of winemaker Delegat top of mind given North America accounts for 52% of its revenue. The company’s shares fell 0.2% to $4.34 on Thursday.
The winemaker said it’s working with New Zealand Winegrowers and its US distributors to understand the new arrangements.
Trump 1.0
Delegat enjoyed a plum period through Trump’s first term of presidency, with its share price soaring 162% from the end of 2016 through to the end of 2020 as annual sales in North America from 1 million cases in the June 2016 year to 1.4 million cases four years later.
The winemaker hoped to hit more than 2 million cases by 2022, but the shipping snarl-ups caused by the covid pandemic stalled that growth with North American case sales at 1.7 million in the June 2024 year. Since 2021, the shares have slumped 71%, trading at their lowest level since September 2014.
ASX-listed Treasury Wine Estates said it expects minimal impact from the tariffs with 85% of its US sales produced in America, while the 15% from Australia and New Zealand is imported into the US as bulk wine and packaged locally.
While some investors hoped having the size of the tariffs out in the market would ease some uncertainty plaguing global markets, the second-round effects from other nations’ responses and the potential to slow global growth and push up inflation leave the outlook cloudy.
Listed companies were torn as to whether they needed to update the market as to the impact, given what they could immediately say might prove to be wrong.
Rubber goods maker Skellerup, which derives about 35% of its revenue from the US, said cost-cutting initiatives already in place mean the tariffs won’t affect the current June financial year, but will weigh in future years.
“We expect to offset a significant proportion of these costs with a combination of continuous improvement activities, pricing and cost initiatives and expanding our in-market manufacturing capability,” chief executive Graham Leaming said in a statement.
Skellerup shares fell 2.9% to $4.68 yesterday, snapping three days of gains.
Looking back
Its industrial division was knocked by Trump’s trade war with China in the first term, although its share price more than doubled through that period as the company continued to steadily grow.
Energy efficiency firm AoFrio said it isn’t in a position to work out the impact of the tariff regime, or what responses it will take, while Fisher & Paykel Healthcare – which has manufacturing operations in Mexico – said the import levies will probably increase its costs in the March 2026 year and potentially delay its return to its target gross margin, but it will provide more details when it reports its 2025 annual result.
Matt Goodson, managing director at Salt Funds Management, said the second-round impacts of the tariff regime will have the biggest effect on markets, especially how other countries react.
“Markets are always trying to know what comes next,” he said.
ASB Bank senior economist Mark Smith estimates the total hit to gross domestic product will be about 0.5 of a percentage point, although exporters diverting trade to other markets might mitigate that, and service exports – which account for about 40% of New Zealand’s sales to the US – appear to have sidestepped the tariff regime.
“A global trade war beckons, which is bad news for a small open economy like NZ. However, we are assuming that NZ does not counter with reciprocal tariffs on imports from the US,” Smith said in a note.
“It is not in NZ’s economic interest to retaliate, with the imposition of NZ tariffs on US exports adding to costs faced by NZ firms and households. Not responding will lessen the overall NZ economic hit.”
Reporting by Paul McBeth. Image from Scottsdale Mint on Unsplash.
