NEWSROOM
Building resilience to the shocks afflicting global trade
When President Trump announced sweeping new tariffs on almost all US imports, calling it “Liberation Day”, the reaction among some American CEOs was instant.
On a live earnings call, the head of luxury furniture chain Restoration Hardware swore when he saw his company’s share price plunge more than 25% in after-market trading.
The shock came after tariffs amounting to more than 50% were slapped on imports from China and Vietnam, countries that supply most of the company’s products. With little warning or clarity on how long the new measures would last, the company’s supply chain and pricing model were suddenly in turmoil.
New Zealand exporters were spared the worst. Our products currently face the lowest base rate under the new regime, 10%, compared to significantly higher rates imposed on many other countries. But the real lesson isn’t about direct exposure. It’s about uncertainty.
The tariffs triggered turbulence not just in value chains but in financial markets and investor confidence. That volatility affects all globally integrated economies, including ours. The core issue is no longer trade access but how businesses build resilience when the rules can change overnight.
And that’s where New Zealand needs to look in the mirror. For decades, we’ve optimised our economy for openness and efficiency. But in an era of shocks, including pandemics, tariffs, geopolitical tension and climate disruptions, those strengths become vulnerabilities if we lack the capacity to respond.
What’s needed now is something more fundamental: the ability to make, adapt and substitute when the global system falters.
During the Covid-19 pandemic, New Zealand was abruptly cut off from many of the goods it relied on, from PPE and testing kits to IT hardware and agricultural inputs. Firms scrambled to adapt. Some found local substitutes. Others waited. Many couldn’t deliver.
That experience should have prompted a hard rethink: what happens when we can’t access what we need? What if the next shock disrupts a critical link in our supply chains?
Free trade agreements and diversified suppliers help. But they don’t replace the ability to respond quickly, locally, and with some control over essential production.
That’s why we need to invest in something overlooked in current policy debates: capability.
Building local capability doesn’t mean walling ourselves off from the world. It means developing the capacity to produce, substitute or adapt key goods and services.
This is not about self-sufficiency. It’s about having options. That’s what resilience is: having multiple ways to meet your needs when circumstances change.
For New Zealand entrepreneurs, this shift presents an opportunity. Identifying vulnerable imports and developing local alternatives is prudent and could be the basis of entirely new businesses and business models. Products developed to fill local gaps during crises often evolve into innovative exports.
But it’s not easy. Replacing an imported input with a local one takes capital, time and risk-tolerant partners. Many firms don’t have the innovation capacity, scale or margins to take that on alone. These investments in resilience are hard to justify without policy support, especially when global prices are still the benchmark.
We already have a strong science base, a deep-tech ecosystem, and an entrepreneurial culture. However, we aren’t yet thinking about a coordinated strategy to turn those assets into an economic buffer.
The government could start by mapping critical import dependencies, like fuel and medicine- and the everyday components that keep agriculture, health, logistics and digital infrastructure functioning. Feasibility studies could identify which are viable to produce domestically.
Targeted co-investment could help scale early efforts in the innovations needed, like new materials or scalable micro-manufacturing.
Universities and other research organisations should play a central role in this effort. These institutions can help prototype new technologies, test small-scale production methods, and offer technical expertise to businesses exploring local alternatives.
Innovation partnerships between tertiary providers and firms, especially in areas like agri-tech, renewable energy and advanced materials, could shorten the time from idea to implementation, particularly for SMEs.
Public procurement rules could reward suppliers that strengthen domestic capacity, not just those offering the lowest cost.
And we need better visibility. Where are the critical points of dependency in our import profile? Which sectors have no fallback? What capabilities are within reach but underdeveloped?
Trade has long been the cornerstone of New Zealand’s prosperity. That won’t change. But “Liberation Day” demonstrates that openness alone no longer guarantees stability. The next disruption is likely already underway somewhere in the system.
The economies that will do best in a world of constant disruption will be those that can respond first. That means investing not only in access to global markets as we have done, but in the domestic capacity to act when global systems break down.
CIE’s Academic Director, Professsor Rod McNaughton
CIE’s Academic Director, Professsor Rod McNaughton
When President Trump announced sweeping new tariffs on almost all US imports, calling it “Liberation Day”, the reaction among some American CEOs was instant.
On a live earnings call, the head of luxury furniture chain Restoration Hardware swore when he saw his company’s share price plunge more than 25% in after-market trading.
The shock came after tariffs amounting to more than 50% were slapped on imports from China and Vietnam, countries that supply most of the company’s products. With little warning or clarity on how long the new measures would last, the company’s supply chain and pricing model were suddenly in turmoil.
New Zealand exporters were spared the worst. Our products currently face the lowest base rate under the new regime, 10%, compared to significantly higher rates imposed on many other countries. But the real lesson isn’t about direct exposure. It’s about uncertainty.
The tariffs triggered turbulence not just in value chains but in financial markets and investor confidence. That volatility affects all globally integrated economies, including ours. The core issue is no longer trade access but how businesses build resilience when the rules can change overnight.
And that’s where New Zealand needs to look in the mirror. For decades, we’ve optimised our economy for openness and efficiency. But in an era of shocks, including pandemics, tariffs, geopolitical tension and climate disruptions, those strengths become vulnerabilities if we lack the capacity to respond.
What’s needed now is something more fundamental: the ability to make, adapt and substitute when the global system falters.
During the Covid-19 pandemic, New Zealand was abruptly cut off from many of the goods it relied on, from PPE and testing kits to IT hardware and agricultural inputs. Firms scrambled to adapt. Some found local substitutes. Others waited. Many couldn’t deliver.
That experience should have prompted a hard rethink: what happens when we can’t access what we need? What if the next shock disrupts a critical link in our supply chains?
Free trade agreements and diversified suppliers help. But they don’t replace the ability to respond quickly, locally, and with some control over essential production.
That’s why we need to invest in something overlooked in current policy debates: capability.
Building local capability doesn’t mean walling ourselves off from the world. It means developing the capacity to produce, substitute or adapt key goods and services.
This is not about self-sufficiency. It’s about having options. That’s what resilience is: having multiple ways to meet your needs when circumstances change.
For New Zealand entrepreneurs, this shift presents an opportunity. Identifying vulnerable imports and developing local alternatives is prudent and could be the basis of entirely new businesses and business models. Products developed to fill local gaps during crises often evolve into innovative exports.
But it’s not easy. Replacing an imported input with a local one takes capital, time and risk-tolerant partners. Many firms don’t have the innovation capacity, scale or margins to take that on alone. These investments in resilience are hard to justify without policy support, especially when global prices are still the benchmark.
We already have a strong science base, a deep-tech ecosystem, and an entrepreneurial culture. However, we aren’t yet thinking about a coordinated strategy to turn those assets into an economic buffer.
The government could start by mapping critical import dependencies, like fuel and medicine- and the everyday components that keep agriculture, health, logistics and digital infrastructure functioning. Feasibility studies could identify which are viable to produce domestically.
Targeted co-investment could help scale early efforts in the innovations needed, like new materials or scalable micro-manufacturing.
Universities and other research organisations should play a central role in this effort. These institutions can help prototype new technologies, test small-scale production methods, and offer technical expertise to businesses exploring local alternatives.
Innovation partnerships between tertiary providers and firms, especially in areas like agri-tech, renewable energy and advanced materials, could shorten the time from idea to implementation, particularly for SMEs.
Public procurement rules could reward suppliers that strengthen domestic capacity, not just those offering the lowest cost.
And we need better visibility. Where are the critical points of dependency in our import profile? Which sectors have no fallback? What capabilities are within reach but underdeveloped?
Trade has long been the cornerstone of New Zealand’s prosperity. That won’t change. But “Liberation Day” demonstrates that openness alone no longer guarantees stability. The next disruption is likely already underway somewhere in the system.
The economies that will do best in a world of constant disruption will be those that can respond first. That means investing not only in access to global markets as we have done, but in the domestic capacity to act when global systems break down.
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