Chief economist at Simplicity, Shamubeel Eaqub. Photo: RNZ
An economist predicts countries will form a new club for trade and thinks New Zealand should join.
The Dow Jones Industrial Average fell another 5.5 percent overnight, in reaction to the Trump administration's wide-ranging tariffs.
Chief economist at Simplicity, Shamubeel Eaqub said the tariffs will affect the way markets work and dent business confidence.
But he believed it will lead to an alternative trading group.
"I truly believe that there is going to be a new group of countries that will come together that will try to build a parallel system that is rules based, that is consistent, that is friendly," he told Saturday Morning.
"And I think we really want to be part of that because that's what will give us resilience, and that will give us hope for long term prosperity."
Eaqub said that the New Zealand government should still first be looking to make diplomatic overtures to the US in hopes of potentially reducing the tariffs.
But stressed the importance of being part of the cluster of countries that will breakaway as part of a potential new trading agreement.
"The real opportunity right now is there is a moment in history when these other countries that have been affected will want to create a club that's stronger, deeper, and with fewer barriers," he said.
"We want to be in the second club that is going to rise on the back of the US retreating from this global trade order.
"I think that's the real opportunity, and that would be the big advice is how can we part of this alternative new thing that's going to be built? Because I'm absolutely confident it will be built."
Eaqub urged caution from separating too far from the US, as a security force and it having the largest defence in the world.
Eaqub said there's still a very big risk New Zealand could fall back into recession.
Photo: SAUL LOEB
"It's a very big risk for us, I think the offsetting forces for New Zealanders, we've got interest rates that are falling and I'm absolutely confident the Reserve Bank will keep cutting interest rates because they need to, and that is going to be a buffer against these global uncertainties," he said.
"But I don't think our exporters can be too confident that they'll be protected by this weakness or the lowering of interest rate, It's not enough.
"We'll still be affected by potentially falling commodity prices and potentially by reduced demand from our global trading partners."
While the direct impact of Trump imposing a 10 percent tariff on New Zealand exports is blatant, Eaqub is more concerned about the ramifications of a trade war between the US and China.
"The bigger risk for me is the countries that we trade with, China, Asia, those markets that have been massive drivers of our economy and our exports over the last 30 years," he said.
"They're the ones that are being hit hard. So, this retaliation between China and the US, this escalating trade war, it is likely to affect the Chinese economy, and that is likely to affect us in turn, and it's the second hand effect that I'm much more concerned about.
"We just don't know when it's going to stop ... what happens next still remains uncertain."
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
