16 March 2026 – The RBNZ has published an Analytical Note exploring the implications of changes in US tariff policy for the New Zealand economy.
What this paper is about
On 2 April 2025, the US government announced its intention to significantly increase tariffs on imported goods.
In this Note, we study the potential impact of these events on the New Zealand economy. We find that in the short-run, trade diversions and the appreciation of the New Zealand exchange rate create deflationary pressures. Lower inflation induces lower interest rates which boosts domestic output. Over time, however, there may be inflationary pressure as global supply chains become less efficient. The analysis in this Note supplements our other related studies on the impact of changes in US tariff policy, such as on the impact of uncertainty shocks.
Key findings
- This Analytical Note explores the implications of changes in US tariff policy for the New Zealand economy, using the G-Cubed model to undertake scenario analysis. Our baseline scenario captures tariff announcements as of 31 July 2025.
- To capture the depreciation of the US Dollar following the tariff announcement, we further consider shifts in bond and exchange rate markets that are associated with an increased perception of risk in investing in US assets.
- The shock is disinflationary in the short run as it leads to trade diversions and appreciation of the New Zealand currency which lower import prices. The disinflationary pressure induces lower interest rates supporting the domestic economy. Overall, despite the weaker export sector, the effect on domestic real GDP is relatively modest.
- Over time however, global supply chains become more inefficient contributing towards higher import prices, creating some inflationary pressure by around 2030.
Why we did this research
The resulting disruptions to the global trade may affect the New Zealand macroeconomy through export demand, import prices, supply chains, and global financial conditions. In this Note, we study the impact of the changes to the US tariff policy through the lens of the G-cubed model. The model is a global trade model that features disaggregated country- and sectoral-level details. Alternative scenarios are examined to capture the evolving situations around the global tariff environment.
What data have we used?
The calibration and estimation of the parameters in the G-cubed model are done by the external model developers. The data used originate from various sources, such as the Global Trade Analysis Project (GTAP) model, IMF, World Bank, OECD, United Nations, the US Energy Information Administration, and the University of Groningen Growth and Development Centre.
More information:
Effects of US Trade Policy on the New Zealand Economy: https://govt.us20.list-manage.com/track/click?u=bd316aa7ee4f5679c56377819&id=5fb6033bf4&e=f3c68946f8
