The latest round of tariffs from the Trump administration sees Australia and New Zealand imposed with a 12.5% tariff barrier. The excuse given relates to forced labour. Kind of weird that as I don't see how forced labour is involved in producing NZ wine. But, I laughed at Australia which has gone out of its way to be a lapdog of the US, only to be kicked in the teeth as well.
Interestingly, NZ faces a 12.5% tariff on its lamb meat, but not beef. That would be because hamburger patties sold by McDonalds are made with NZ beef. The NZ beef has the right consistency to hold together and is therefore easier to cook and serve as a hamburger.
A useful lesson in how tariffs and uncertainty in business ends up wrecking the economy. Everyone should take note - be careful what you wish for.
I have embedded a video below which covers some important areas. Caleb Ragland at the end makes good points, but I think he's misguided, it appears the Trump administration intends harm on the US economy and to international trade.
Mr Ragland is president of the American Soybean Association. He's from Kentucky, a US state very similar to New Zealand, agriculture is important to both, although NZ has the greater GDP. Ragland's soybean crop is exported to China. China alone imports 60% of all exported soybean. So, a trade war could wreck the livelihoods of soybean growers, as China may substitute US exports with those of other countries, such as Brazil, Argentina, Paraguay or even Australia.
Early in the video CBS look at dairy farming in the US. Lack of clarity with regard immigration policies, leads to uncertainty. The claim is made that dairy farms in the US cannot function without using undocumented workers. That sounds unusual to my ears, as NZ is the world's largest dairy exporter and it too has labour shortages, but the country brings in farm labour from places like the Philippines. They're in the country legally and have a path to citizenship and eventually farm ownership (or as sharemilkers). Tariffs will not help as input costs rise, giving the dairy farmer an added burden.
What I'm describing is a perfect storm: the US economy could be brought to its knees. Warren Buffett always cautions; never bet against the US economy. Well, this time he may be wrong.
