Navigating Global Shifts seminar series: Landfall in unknown seas: Global regime change and economic transformation in New Zealand

Regime Change Hits Home

The global economic order that prevailed since the 1990s—characterised by open markets, rules-based trade, and U.S.-led globalisation—is eroding fast. Actions by the second Trump administration, including 'Liberation Day' tariffs and reciprocal duties averaging 15% on many imports, have intensified this shift. These measures, upheld despite legal challenges in some cases, target not just adversaries but long-standing partners, prompting retaliatory blocs and supply-chain realignments that exclude or sideline smaller players.

New Zealand, a small open economy reliant on agricultural and commodity exports, feels this acutely. The country has long benefited from low barriers and stable access to major markets, but recent U.S. policies have downgraded global trade growth forecasts and raised costs for exporters. Commodity prices provide some buffer, but uncertainty from geopolitical tensions—in Europe, the Middle East, and U.S.-China rivalry—compounds vulnerabilities in supply chains and capital flows.

The stakes are concrete: prolonged low productivity growth, already a 25-year concern, could lock in stagnant wages and fiscal pressures from an ageing population. Trade fragmentation risks higher import costs for essentials and machinery, squeezing margins in key sectors like dairy and meat. Deadlines loom with the 2026 election, where policy choices on reform and spending will shape resilience; delays in adapting could see competitors in similar small advanced economies pull ahead through targeted innovation and alliances.

Non-obvious tensions abound. While diversification into Asia or new blocs offers opportunity, it trades U.S. market access for exposure to different risks, like regional instability or China's economic slowdown. Aggressive industrial policy abroad creates both threats (subsidised competition) and openings (niche high-value exports). Domestic trade-offs pit short-term relief for affected industries against long-term investment in R&D, skills, and green transitions—choices complicated by fiscal constraints and election-year politics.