How Donald Trump's tariff shock will change our political economy

President Trump on the day he announced tariffs against Mexico, Canada and China, unleashing a shock to supply chains globally that is expected to slow economic growth and increase inflation for most large economies. Photo: Getty Images

Long stories short, the top six things in our political economy around housing, climate and poverty on Monday, February 3 are:

1. Donald Trump unveiled 25% across-the-board tariffs on imports from Mexico and Canada on Sunday, plus a new 10% across-the-board tariffs on imports from China;

2. Canada and Mexico hit back with their own tariffs and China warned it was considering similar measures, with Trump warning again he plans to slap tariffs on Europe and elsewhere;

3. The tariffs are much deeper and wider than in Trump’s first term, which economists say means the shock to supply chains globally is expected to slow economic growth and increase inflation for most large economies;

4. That higher global inflation and higher global interest rates adds a major headwind to the Government’s hopes for an economic and housing market recovery in 2025;

5. The impact will be messy, however, with some winners both here and overseas, including New Zealand’s beef and wine exporters to the United States, who may see their sales increase because Canada and Mexico are major exporters of beef to the United States¹, while tariffs on European wine imports could help New Zealand, which is now the third largest source of wine imports to the United States; and,

6. The blanket tariffs are the biggest restriction to globalisation since the Second World War, which should force New Zealand’s political, diplomatic and business leaders to question baked-in and decades-long assumptions about ever-freer trade and whether we need to choose between a US-led trade and security bloc and a China-led one, or avoid picking one altogether.

(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes from paying subscribers we’ll open it up for public reading, listening and sharing.)

Inside the biggest hit to globalisation in 70 years