Background on Recent US Trade Policy Shifts

New Zealand exporters are navigating a complex and rapidly evolving landscape of US import duties. In February 2026, following a US Supreme Court ruling, the previous reciprocal tariffs were replaced by a new 10 percent global surcharge under Section 122 of the Trade Act of 1974. This surcharge applies to most goods entering the United States and has already increased costs for many New Zealand products.

The United States remains a vital market for New Zealand, accounting for a significant share of the country's total exports. Key sectors such as agriculture, food and beverage, and manufactured goods have long benefited from established trade relationships, but recent policy changes have introduced new uncertainties for businesses planning shipments across the Pacific.

The Proposed Additional Tariff and Its Rationale

The latest development involves a proposal from the United States Trade Representative to impose an additional 12.5 percent tariff on imports from New Zealand and approximately 60 other countries. This measure is framed around concerns over forced labour in global supply chains. The proposal targets nations alleged to lack sufficiently robust prohibitions on goods produced using forced labour.

Under the plan, countries that have implemented or committed to forced labour import bans would face a lower rate of 10 percent, while others, including New Zealand, are slated for the higher 12.5 percent duty. The United States Trade Representative has scheduled hearings for 7 July 2026, with written submissions due by 6 July 2026. It remains unclear whether this new tariff would replace or stack atop the existing 10 percent surcharge once the Section 122 measure expires in July 2026.

New Zealand Government Response

Trade Minister Todd McClay has described the proposal as having little connection to actual forced labour issues and instead views it as a mechanism to raise overall tariff levels. New Zealand officials have already made representations to US counterparts during the investigation phase, and further engagement is expected before any final decision. The government continues to monitor developments closely through the Ministry of Foreign Affairs and Trade and Export New Zealand.

McClay noted that New Zealand had been positioned at a 15 percent rate in earlier iterations and expressed relief at the proposed 12.5 percent figure, while stressing that any tariff increase harms trade and ultimately raises costs for American consumers. Officials emphasise the importance of maintaining open dialogue to protect New Zealand's export interests.

Impacts on Key Export Sectors

The proposed tariff would affect a wide range of New Zealand goods destined for the US market, with particular pressure on lamb, dairy products, and wine. These sectors form the backbone of many regional economies and support thousands of jobs in rural communities. Exporters report that the additional cost could reduce competitiveness against domestic US producers or goods from countries facing lower rates.

Some products, including beef and kiwifruit, have received exemptions under the current 10 percent surcharge due to insufficient domestic US supply. It is not yet known whether similar carve-outs would apply to the proposed 12.5 percent rate. Smaller exporters and those with thinner margins are especially vulnerable, as they may struggle to absorb or pass on the increased duties.

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Exporter Perspectives and Business Challenges

New Zealand businesses are already adjusting to the existing 10 percent surcharge, which has been in place since late February 2026. Many report difficulties in long-term planning because of frequent shifts in US trade policy. The prospect of a further increase to 12.5 percent adds another layer of complexity, prompting some firms to explore alternative markets or renegotiate supply contracts.

Industry groups such as Export New Zealand are working with government agencies to provide guidance and advocate for favourable outcomes. Exporters highlight the need for clear timelines and transparent criteria so they can make informed decisions about production volumes and pricing strategies.

Broader Economic Context and Modelling

Reserve Bank of New Zealand analysis has examined the potential ripple effects of higher US tariffs on the domestic economy. Scenarios modelled include average US tariff rates rising to 12 percent or even 22 percent, illustrating how such changes could influence New Zealand's export volumes, exchange rates, and overall growth trajectory.

While the direct impact on gross domestic product may be modest given the relatively small share of total exports affected, concentrated effects in agriculture and related industries could be more pronounced. Policymakers are considering a range of responses, including diplomatic efforts and support measures for affected businesses.

International Comparisons and Reactions

New Zealand is not alone in facing the proposed 12.5 percent rate. Australia, the United Kingdom, India, and several other economies are listed in the same category. In contrast, Canada, Mexico, and the European Union have been proposed for the lower 10 percent tier. This differentiation has sparked discussions among trading partners about coordinated responses and the broader implications for global trade rules.

Critics, including New Zealand's Council of Trade Unions, have characterised the measure as a bad-faith project that uses forced labour concerns as a pretext for protectionist policies. Supporters within the US administration argue that the tariffs encourage stronger enforcement of labour standards worldwide.

Potential Pathways Forward and Mitigation Strategies

The consultation period offers New Zealand stakeholders an opportunity to submit evidence and arguments before the 6 July deadline. Government agencies are encouraging exporters to document any supply chain due diligence already in place and to highlight the absence of forced labour concerns in New Zealand-origin goods.

Businesses are advised to review their US customer contracts for clauses that allocate tariff costs, explore hedging strategies for currency and duty fluctuations, and consider diversifying export destinations. Some firms are accelerating investments in traceability systems to strengthen their position in future trade negotiations.

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Future Outlook for NZ-US Trade Relations

With hearings scheduled for early July and a final decision pending, the situation remains fluid. New Zealand officials continue to emphasise the country's strong record on labour standards and its commitment to rules-based international trade. The outcome will influence not only immediate export flows but also the tone of bilateral economic discussions in the months ahead.

Exporters are urged to stay informed through official channels such as the Trade Barriers NZ website and updates from the Ministry of Foreign Affairs and Trade. Proactive engagement with US importers and participation in the public comment process represent practical steps to shape the final policy.

Actionable Advice for Businesses

Companies trading with the United States should:

• Assess exposure of specific product lines to the proposed tariff
• Prepare detailed submissions for the USTR consultation by the 6 July deadline
• Engage legal and trade compliance experts to review contract terms
• Monitor announcements from Export New Zealand and government agencies
• Explore opportunities in other markets while maintaining core US relationships

Early preparation can help mitigate risks and position New Zealand exporters for resilience regardless of the final tariff outcome.