Stephen Jacobi: Tariffs, Geopolitics and Other Challenges

The following remarks were made by Stephen Jacobi to a recent payment industry forum. Stephen is one of the Foundation’s Honorary Senior Fellows,

Thank you for inviting me to join you today. In recent weeks, we’ve seen a trade shock few thought possible: the United States has imposed sweeping tariffs across the board — and New Zealand now faces discriminatory treatment compared with other trading partners. For the finance and payments industry, this isn’t just a trade story. It’s about increased friction in cross-border transactions and a new climate of uncertainty that can slow investment and disrupt growth.

This afternoon I want to focus on three things:

• The global economic environment we’re navigating right now.
• The new wave of US tariffs and what they mean for Aotearoa New Zealand.
• Other global challenges — from climate change to AI — that will shape both trade and financial services in the years ahead.

Global environment

The announcements  on 1 August of a new wave of tariffs in the US marked a defining moment – even more so for us than “L Day” back in April. Even so we have been living for some time with significant uncertainty. Uncertainty is bad for business. The root causes of this uncertainty are not just to do with decisions of the US Administration, but reflect signifcant geo-economic and geo-political shifts fueled by conflicts in Europe and the Middle East (even South Asia only recently) and a continuing game of thrones in the Asia Pacific region. Last April’s IMF report already painted a worrying picture. The slow global economic recovery was revised downwards in April to 2.8 percent for 2025 and 3 percent for next year. That was before the latest tariff announcements. Developing economies have been hard hit. While financial markets have been quick to adjust, the medium term outlook is not so positive. The impact on trade is also potentially severe. Back in April the World Trade Organisation was forecasting that the volume of world merchandise trade would decline by 0.2 percent in 2025. Earlier this year, the WTO expected to see continued trade growth. New Zealand’s own trade performance this year has been very encouraging. While the rest of the economy has been sluggish, export volumes and prices have continued to grow, but how long this might last is uncertain. The risk of protectionism and uncertainty does not just mean lost business opportunities: it is that capital investment is delayed or cancelled. That capital investment is required to boost innovation and market development and  to address macro challenges like climate change, poverty elimination and social and economic development.

US tariffs

Protectionism is not new, nor just the fault of any one country, but the current US Administration is turning it into an art form. The changes in trade policy either conceived, planned, announced, implemented and then suspended have been so rapid and far reaching that it has been hard to keep up. Recent weeks have seen a parade of Heads of State and Ministers heading to Washington to try to negotiate lower rates. There’s a saying that to outrun a grizzly bear, you only need to run faster than the person running next to you. No-one wants to be the least favoured nation or get chomped by the US bear!

Trump’s tariff world looks like this:

• Tariffs now range from 10% to 50% for all trading partners. These are mostly added on top of existing tariffs, or set as the maximum rate that can apply.
• New Zealand faces an extra 15% tariff. For some products, this stacks up — e.g. butter already had a 15% tariff, so the total is now 30%.
• Tariffs are applied depending on whether the US has a trade surplus or deficit with a country, and whether a trade deal exists. Large economies like China, Japan, and the EU have made such deals, but details are unclear.
• Extra tariffs also apply to key sectors like steel, aluminium, motor vehicles, copper, and semiconductors, even for countries with trade deals. These are usually not additional to the general tariffs.
• Some tariffs are still undecided. Of relevance to New Zealand, wood products and pharmaceuticals are under investigation and could be hit with extra tariffs.
• Finally, some tariffs are political. For example, a 25% tariff on countries buying oil from Venezuela, a 25% tariff on India for buying oil from Russia, and a 50% tariff on Brazil.

The result of all this is considerable confusion and uncertainty (that word again) about what tariffs are actually being applied and to whom. For financial institutions and payment providers, these erratic changes increase friction in cross-border transactions, introduce new compliance and risk burdens, and destabilise transaction flows.

For New Zealand exports additional tariffs of 15 percent, up from the 10 percent applied in April, is a huge risk for the continuity of our business with our second largest trading partner. We have been punished for our own success in developing a small trade surplus with the US rather than any other action we have taken. It’s cold comfort that New Zealand’s average (weighted) tariff on US imports is 1.8 percent compared to 4.2 percent earlier applied by the US to New Zealand. If this were not bad enough, New Zealand stands to be impacted by the tariffs the US applies to our competitors in the United States. Australia, Argentina, Chile and Uruguay are all competitors for us especially for beef and wine – they all now face 10 percent tariffs which puts us at a disadvantage. Furthermore, there is the risk that tariffs on other partners will have negative effects on growth in those markets such as China, Viet Nam or even in Europe. Or that we could face competition from exports diverted away from the United States: the 50 percent tariff applied to Brazilian exports could see Brazilian beef being exported to markets like China where we have significant business. The talk of retaliation from other partners has quietened down for now, but may come back to the fore as the full effect of US tariffs is felt. How will China, the EU and India react – this is how a global trade war begins. I must emphasise – these are worst case scenarios. The reality is that it is hard to predict what could happen in coming months and is certainly necessary not to over-react. For business where there is risk there is also opportunity: New Zealand exporters for example could see new opportunities open up as US competition is driven away from third markets. Canada is a great place to sell New Zealand wine right now! We need to react strategically, but remain flexible to adapt to the changing environment.

Fortunately, New Zealand is not without options. We have a wide network of high-quality and comprehensive FTAs and good market access in Asia, Europe and now also the Middle East. This includes the 12 members of the Comprehensive and Progressive Trans Pacific Partnership (CPTPP), which gives us preferential access to key markets across the Asia-Pacific—Japan, Canada, Mexico, and others. These agreements will help to cushion the blow from unilateral moves like those we’re seeing from the US, which remains an important and high value market. I am not one who thinks we could have somehow negotiated our way out of 15 percent: the fact is with a small market we have little to offer the US and we need to be wary of opening ourselves up to US demands we might find difficult to accept, for example about Pharmac or our economic exposure to China. There is no doubt that we will need to look increasingly to other partners – the Prime Minister is absolutely right to pick up the phone to our friends around the world and to seek to expand our collective willingness to uphold the rules of international trade on which the US has now turned its back. As US tariffs disrupt global supply chains, there’s an opportunity for us to deepen trade ties with CPTPP’s 12 members—many of whom are also seeking to hedge against unpredictability. In fact, whatever happens in the United States, we have global trade interests to promote and protect – as a small open trading nation we depend on the rules of international trade enshrined in the World Trade Organisation (WTO) and the various free trade agreements we have negotiated. Our strong economic relationship with China, where we pay mostly no tariffs at all, looms large in this context – it is a relationship which, while complex, needs to be carefully and proactively managed, particularly in the light of geo-political tensions. The irony is that with a stroke of a pen the President has made us even more reliant on market access to China. New Zealand needs to strike a balance in its relations with both super-powers and avoid getting caught in one or other “camp” based on others’ values and interests and from which we may have difficulty extracting ourselves.

Other challenges

But tariffs are not the only headwinds. To stay competitive, we also need to keep our eyes on the bigger forces reshaping trade and finance — sustainability and technology.

Sustainability

Walking the talk on sustainability and meeting the climate challenge are closely linked to our trade prospects. Aotearoa New Zealand has committed to reducing net greenhouse gas emissions by 50% below gross 2005 levels by 2030. Today it seems we are still some way off from meeting this target which implies a significant contingent liability – in other words either we play or we pay! Beyond the debate about how we meet the target, we have a huge incentive to get on the right side of this issue and use our superior carbon performance as an asset in marketing our products overseas. It matters not whether it is consumers (the end purchasers of our products) or customers  (those who actually buy from us) demanding greater attention to sustainability, the writing is clearly on the wall. For the finance and payments industry, climate change is both a risk and an opportunity. Green finance, carbon markets, and sustainability-linked products are growing fast, while regulators are demanding greater climate disclosure. For all sectors, embracing climate responsibility is no longer optional — it’s becoming essential to trust and long-term resilience. That’s why frivolous and frankly damaging talk about leaving the Paris Climate Agreement ,including from politicians who should know better, needs to be nipped in the bud. That would send a very negative message to the rest of the world about the sustainability of New Zealand products and damage our international reputation. In today’s anxious times consumers everywhere are wanting reassurance. Reassurance about a product’s origin, safety and sustainability. This is not just a cost, but a huge opportunity for competitive advantage waiting to be realised. It starts with meeting the climate challenge and living up to our commitments as a responsible international citizen.

Artificial intelligence

A second global challenge I want to mention all too briefly is the advent of new technology like artificial intelligence. Whether in science, business, education, productivity or climate change, AI can help to tackle the world’s greatest challenges, including green development, alleviating poverty and increasing food security, solving significant health issues. But AI is still an emerging technology: opportunity needs to be weighed with responsibility in considering how to develop AI. Appropriate governance and ethical standards are required to harness the benefits and mitigate any potential risks. For the payments and finance sector, AI is already transforming areas like fraud detection, compliance, and real-time analytics. Ensuring we build ethical and efficient AI systems in these spaces is critical to both consumer trust and operational resilience. The point is, there’s still a lot of work to do—both in developing good, ethically based policy and building AI capability here in New Zealand and around the world. We must not let our understandable preoccupation with today’s problems undermine our ability to tackle tomorrow’s challenges. Tariffs after all are so last century.

Conclusion

What is global is local – if there was ever a time when this was true, it is now. We face a complex and increasingly inward-looking world, where old certainties and patterns of global behaviour have given way to disorder and deal-making. That great wave of international co-operation and trade liberalisation which we have enjoyed for 30 years or more is under threat and may be coming to an end. New Zealand is not without options despite what happens in Washington. Agreements like CPTPP show that multilateral trade cooperation is still possible—even as some economies turn inward. New Zealand must continue to champion these frameworks as a counterbalance to rising protectionism.

For the payments and finance industry, the call is clear:

• Build resilience into cross-border systems to handle tariff shocks, compliance changes, and shifting supply chains.
• Invest in intelligence — keep an eye on the global picture and know the policy risks your customers face.
• Innovate for agility — use ethical AI, and new settlement models to adapt quickly when the rules change.
• Support sustainable finance by embedding climate and ESG into your business operations.

In the end, tariffs come and (hopefully) go but how the world reacts to the new realities now upon us will define the shape of economic and social progress in decades to come.

Let’s make sure that New Zealand stays ahead of that bear !