Trumponomics: NZ at risk if Trump elected

The outlook for the New Zealand economy would be bleak under President Trump, a new report suggests.

The report, “Trumponomics: risks for the New Zealand economy” was released by NZIER this morning and suggests a victory for Trump in the race for the White House would be “horrible for the New Zealand economy."

NZIER deputy chief executive John Ballingall tells NBR Radio the prospect of a Donald Trump presidency should worry kiwi firms.

“If Mr Trump beats the odds and emerges victorious, we expect significant instability in financial markets.”

He says borrowing costs for New Zealand firms and mortgage-holders are likely to rise as credit conditions tighten in the face of uncertainty.

“The New Zealand dollar could appreciate against the greenback in the short term if markets are concerned about future US competitiveness, although this might be offset by traders moving away from more peripheral currencies."

Things would get hairy for trade as well if Mr Trump enacts his economic policy campaign promises, the US economy is likely to grow at a slower pace in the medium turn.

In fact, one estimate is that Mr Trump’s policies will see 4.8 million job losses in the US.

“A weaker US economy will have a negative impact on the $8.4 billion of goods and services New Zealand sells to the US. This will be of particular concern to the meat, dairy, wine, wood and tourism sectors,” Mr Ballingall says.

NZIER is not the first New Zealand outfit to outline the potential issues to New Zealand under a Trump presidency.

Earlier this week ASB was sounding a similar alarm, warning New Zealand’s economic momentum could get “Trumpled on.”

Although the economic outlook in this country remains promising, ASB chief economist Nick Tuffley says there is one very literal elephant in the room – the Republican candidate.

“There is a lot of uncertainty about what would happen if Donald Trump were to triumph over his more orthodox rival. There would likely be a lot more trade tension, particularly with China, and a shift in the geopolitical balance if the US turned inward.”

But, like Mr Ballingall, Mr Tuffley says it’s New Zealand’s exposure to world markets which makes the economy the most susceptible.

“New Zealand’s economic prosperity is based on trade, and any trade wars would hamper that – particularly if our biggest trading partners were impacted.

“Donald Trump’s fiscal policies are likely to be inflationary, meaning an earlier return of higher interest rates and a strengthening USD.”