Even the usually optimistic Trade Minister Todd McClay seems doubtful that he can overturn President Trump’s decision to charge New Zealand exports a 15 per cent tariff.
McClay’s problem is that Trump’s decision is based on a formula which has been applied to all countries.
There are exceptions, but if New Zealand moves too far in making political concessions to the United States to get a carve-out, it risks alienating its largest market, China.
We had evidence only last week of how easy it is to do that.
McClay believes Trump’s tariffs will cost New Zealand exporters at least $500 million.
The beef and wine industries will be particularly hard hit. The US is currently our largest market for both meat and wine.
The wine industry faces lower demand internationally, while sheep and cattle farmers have seen their years of uneconomic returns start to recover in large part because of reduced cattle numbers in the US and consequent higher prices for the New Zealand product.
Our total meat exports to the US last year exceeded the total to China.
McClay, who is one of the Cabinet’s most experienced and energetic Ministers with an internationally regarded team of officials in the Ministry of Foreign Affairs and Trade, has already managed to get a phone call through to the US Trade Representative, Jamieson Greer.
But Greer, an experienced international trade lawyer who, like McClay, has lived in Brussels, may not be calling the shots.
“I’d reached out on Friday and said I was seeking a call, and he sort of messaged back overnight, and so we set it up,” said McClay.
“It was two things. The first was to inform them of our disappointment and concern about the effect tariffs would have upon us, the additional 5%, you know, that we didn’t think was warranted.
“We have done more analysis, and we now have come to the figure that US Exports into New Zealand, on average, have a 0.3% tariff on them.
“We sell $9 billion worth of goods, and the trade deficit that they have is about $500 million US.
“So in the scheme of things, it’s not significant.
“In the past, they have had very large surpluses against us when we buy machinery or aeroplanes and so on.
“And there are other times like now, when there’s a modest deficit in our favour.
“He accepted that and explained to me that the President had made a decision, just a very clear decision.”
McClay said Trump’s decision meant that if a country had a surplus against the US last year, it would be subject to a 15 per cent tariff.
If the US had a surplus against a country, the tariff remained at 10 per cent, which was the situation Singapore and Australia found themselves in.
So though he succeeded where many trade ministers will have failed what he learned from the call was not encouraging.
In the meantime, McClay has assigned the person he calls the country’s most senior trade diplomat (presumably Ministry of Foreign Affairs and Trade Deputy Secretary Vangelis Vitalis) to go to Washington immediately, and one of his tasks will be to secure a meeting between McClay and Greer.
But McClay has emphasised the mechanistic formulaic approach taken by Trump and says that the US has other things on its mind in trade negotiations than New Zealand.
“If you think about Jamison Greer, he’s negotiating the final deal for China and the EU. The dance card is pretty full, “he said.
It is hard to see what leverage New Zealand could apply. Our market is simply too small (on a comparative basis) and our average tariffs are already less than one per cent for us to be able to offer any meaningful concessions to the Americans.
Some Australian media have claimed that they got a 10 per cent rather than a 15 per cent tariff because of their political relationship with the United States.
The Australian newspaper said: “This (10 per cent) is testament to the very strong government-to-government ties between Australia and the Trump administration and a relentless diplomatic campaign waged by the Australian embassy and ambassador Kevin Rudd.”
But that seems unlikely.
In 2024, the United States had a $17 billion surplus in its merchandise trade with Australia.
And whether New Zealand can afford to make any more overt overtures to the United States in foreign policy is also risky.
Last week’s opening of an FBI office in Wellington is a case in point.
There is usually nothing unusual about the FBI opening an office embedded in a US Embassy.
There is even one in Beijing.
Many countries, including New Zealand, station police officers overseas in their embassies.
Senior CIB staff are based within New Zealand’s overseas missions in Bangkok, Sydney, Canberra, Washington, London, Jakarta, Apia and Beijing.
Apart from unusual secrecy surrounding the visit of FBI Director Kash Patel to Wellington last Wednesday, it did not seem out of the ordinary.
Both the Foreign Minister Winston Peters and the Security Agencies Minister Judith Collins maintained the visit was all about trans-national crime.
But the high profile that Collins and the directors of the agencies had during the visit gave the game away.
Patel then revealed the office’s real purpose in a video in which he said its presence in Wellington was to “counter China”.
The wording of the Chinese response was tough and left the clear impression that Chinese diplomats thought New Zealand was being two-faced.
The Chinese Ambassador in Wellington posted on “X”: “We have taken note of the assertions by the American side, as well as the remarks by relevant New Zealand Ministers in response to the media.
“We believe that relevant cooperation should not target any third party.
“And we strongly oppose any attempt to make groundless assertions or vilification against China out of the Cold War mentality. Such acts are against people’s will and are doomed to fail.”
It is the phrase that the Embassy has “taken note” of the remarks by the New Zealand Ministers that is interesting.
There are suggestions that the Chinese are losing patience with New Zealand’s recent practice of saying one thing to one audience and something else to another about China.
This was evident only a week ago when the Prime Minister was effusive in his praise of China and its President during a speech to the China Business Summit.
But when Chinese Embassy diplomats went to look for the speech, it was not on the Beehive speech website.
This raised questions about whether it was official policy or just the private musings of the Prime Minister.
Similarly, on Tuesday night, while a New Zealand Defence Force Colonel made a speech at an Embassy function praising the People’s Liberation Army, Foreign Minister Winston Peters was posting on “X” slamming China over its recent actions in Hong Kong.
The FBI issue also provoked a response from the official spokesperson for China’s Ministry of Foreign Affairs in his daily media briefing on Friday.
Only a limited number of questions are accepted for these briefings, and it has to be assumed they are the questions that Beijing wants to highlight.
The United States Associated Press asked about Wellington.
“We noted the reports and are shocked by relevant remarks,” said the spokesperson, Guo Jiakun.
He went on: “Relevant sides need to choose the course of action that is conducive to enhancing mutual trust and cooperation between countries, instead of the other way around.”
It is that impatience with New Zealand on the part of Beijing that might well be tested now that New Zealand is restricted in its exports to the US.
Seeking to politically ingratiate New Zealand in Washington looks highly unlikely to produce any changes in mind from a President who is set in his ways on tariffs and would be equally likely to further risk our biggest trading relationship, which is with China.
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