US/China trade war puts the fear in Kiwi farmers

2:57 pm on 9 August 2019

Analysts say the escalating trade war between the US and China does create some worries for exporters here.

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Earlier this week China's official news agency reported that Chinese companies have stopped buying US agricultural goods. It's understood this comes in response to the Trump administration's announcement of new tariffs on Chinese imports last week.

ASB Bank senior rural economist Nathan Penny said if there was a material weakening in the Chinese currency and subsequent loss of consumers' purchasing power it would not be good for exporters here.

But Mr Penny also noted Chinese restrictions on US agricultural exports could possibly have some upside, as the country would have to look for alternative supply to supplement what it usually sourced from the US.

"China imports a lot of feed... which go into their own production of things like, their own dairy, their own beef their pork and chicken, so we think that [those restrictions] may actually be benefiting us because Chinese domestic costs of production will rise so that will make our stuff [produce] look more competitive," Mr Penny said.

But a more broad worry was how the escalation of the trade war could affect global growth and whether that spills into demand for New Zealand exports more generally, he said.

While the trade war was not having a big impact on exporters here at the moment it was "very much a case of watch this space", he said.

Chinese President Xi Jinping (R) and US President Donald Trump attend their bilateral meeting on the sidelines of the G20 Summit in Osaka on June 29, 2019. (Photo by Brendan Smialowski / AFP)

Photo: Brendan Smialowski / AFP

Julia Jones, the head of analytics NZX's data and insights department, agreed the trade war did create worries for exporters and highlighted the need for New Zealand to supply a diverse range of markets.

"For New Zealand, we export, that's what we do, we export our product and so it [the trade war] creates that sense of uncertainity and fear, I guess, and can really impact sentiment around a lot of our markets," Ms Jones said.

Agriculture Minister Damien O'Connor was in China this week, as part of negotiations for a Regional Comprehensive Economic Partnership agreement which involves 16 countries.

Mr O'Connor said he did not think there was any benefit for any country when China and the US were engaged in a trade battle.

"The instability in the market doesn't help anyone, they are big players... and I think what farmers and exporters from New Zealand need is steady indications of price signals so they can plan ahead and ensure that they make money on upwards prices at a steady rate rather than massive fluctuations either way," he said.