Breakfast briefing: Sweeping tariffs impending, along with retaliation

Economy / news

Ahead of tariffs & retaliation, US vehicle sales surge; other US data volatile; India PMI rises; ASEAN PMIs retail optimism; UST 10yr at 4.21%; gold rises and oil little-changed; NZ$1 = 57.3 USc; TWI = 66.8

3rd Apr 25, 7:19am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand with news the Trump tariff announcement will be just after 4pm New York time today when Wall Street closes. That is 9am New Zealand time. After that, it will be all about the size and nature of the retaliation from its former allies.

In the meantime we should note that American vehicle sales surged in March as buyers rushed to get pre-tariff-cost vehicles. March's sales ran at a 17.7 mln annualised rate, the highest since October 2017 (if we ignore a pandemic-affected spike). Bringing forward purchases like this doesn't augur well for subsequent months. Not included in this surge were Tesla sales which fell -13% in the quarter, largely attributed to the anti-Musk factor. Tesla's production far exceeded sales which were at their lowest since 2022, and that was after "model changeover" production cutbacks. (Also not doing so well are the shares in Truth Social, which are down -44% so far this year.)

US mortgage applications decreased last week from the prior week but are now +9% higher than the low year-ago levels. Refinance activity fell and purchase activity rose. This is the third straight week of overall declines. Benchmark mortgage interest rates changed little over the past week.

US factory orders rose in February from January - marginally, but remain -0.5% lower than year-ago levels.

This weekend we get the American non-farm payrolls data for March and a modest rise of +128,000 jobs is anticipated. In advance of that, the ADP Employment Report out today said private payrolls rose +155,000 in March which was better than expected. Although low by historical standards, this is a 'good' result.

After two strong months, the US Logistics index fell back and quite sharply to a level they last had in August 2024. Every aspect except warehouse capacity slowed.

In India, they recorded a notable rise in their factory PMI. New order growth strengthened despite softer a softer rise in exports. This PMI result was their best since June 2024.

In the ASEAN countries, their March PMIs together painted a picture of a modest expansion even if it did slip in March from February. Price pressures eased, and sentiment remains solid. Malaysia was perhaps one of the weaker performers in this group.

The UST 10yr yield is now at 4.21%, up +5 bps from yesterday at this time. The key 2-10 yield curve is still at +30 bps. Their 1-5 curve is now inverted by -9 bps. And their 3 mth-10yr curve is less inverted, now also by -9 bps. The Australian 10 year bond yield starts today at 4.44% and back up +6 bps from yesterday. The China 10 year bond rate is now at 1.85% and down -2 bps. The NZ Government 10 year bond rate is now at 4.55%, and down -2 bps from yesterday at this time.

Wall Street is in its Wednesday session up +0.3% on the S&P500 before the tariff announcements. Overnight, European markets all fell about -0.5%. Yesterday, Tokyo ended its Wednesday session up +0.3%. Hong Kong and Shanghai were both little-changed. Singapore fell -0.4%. The ASX200 ended its Wednesday session up a very minor +0.1%. And that was mirrored by the NZX50.

The price of gold will start today at just on US$3132/oz and up a net +US$25 from yesterday and still just off its all-time high.

Oil prices are little-changed from yesterday at just under US$71.50/bbl in the US and the international Brent price is now just under US$75/bbl.

The Kiwi dollar is now at 57.3 USc and up +40 bps from this time yesterday. Against the Aussie we are up +30 bps at 91.1 AUc. Against the euro we are up +10 bps at just over 52.8 euro cents. That all means our TWI-5 starts today now just under 66.8 and up +30 bps.

The bitcoin price starts today at US$87,214 and up another +2.5% from this time yesterday. Volatility over the past 24 hours has been rising but still modest at +/- 1.9%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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14 Comments

by murray86 | 3rd Apr 25, 7:30am 1743618627

I would suggest that a lot of the harm has been done already. The best Trump can do now is renege on his tariff promises, but it is too late. No one is going to trust the US again for a very long time. Countries with an established manufacturing capability will find they can export to places Not-America a bit easier. I think India and China will do alright in the long run, although China will lose a lot of it's US market. If Trump sticks to his guns he will further fuel the move away from the US$ as the reserve currency. The sooner countries are able to orient away from the US, the less the chaos emanating from there will affect them.

For us, I feel this reinforces the lessons I talk about from COVID around building national resilience and becoming less reliant on international supply chains. As yet though, it doesn't look like Luxon understands that.

by powerdownkiwi | 3rd Apr 25, 7:37am 1743619028

Luxon and understand in the same sentence,

Well done.

Luxon is like Hoggard - puts money before people. We need to not only be rid of such arrogance/ignorance, we need to establish a different process. As you say, one which is resilient, capable of being maintained. That may well not include fractional-reserve banking, it certainly cannot include exponential growth ad infinitum.

Trump is merely the expression of a hegemony up against the Limits to Growth, he has limited moves available. Canute was in the same bind, a few years back...

by IT GUY | 3rd Apr 25, 7:41am 1743619306

All the debt we have to support dairy tourism and the 70% of the debt for housing requires interest to be paid offshore ….

self sufficient is not a characteristic of the structure

by powerdownkiwi | 3rd Apr 25, 7:51am 1743619918

Agreed. And logically, that means it is temporary.

Traceable to irreversible draw-down of resource stocks.

The last of which we are lining up to fight over...

by Foxglove. | 3rd Apr 25, 8:42am 1743622949

Luxon is a little leader of a little country. All of New Zealand, population and economy wise, could fit into the greater city of Phoenix AZ. Of course New Zealanders worry about New Zealand and notice what New Zealand is and is not doing but the reality is if both islands sunk tomorrow the world stage would, after a while, scarcely notice.

by Foxglove. | 3rd Apr 25, 7:53am 1743620030

Trump has been in office less than three months. There are years more to come. The man has phenomenal stamina and activity levels. Unparalleled amongst all his predecessors, even at much younger ages. Yet if I am not mistaken he doesn’t actually look all that convincingly healthy and the age is comparable with the onset and then rapid decline of Biden. Suggest should that be so, and given Trump’s unassailable and unquestionable total authority, the problems of today may seem minor in a few years time.

by IT GUY | 3rd Apr 25, 8:14am 1743621266

Xi also

by Foxglove. | 3rd Apr 25, 8:34am 1743622498

Yes a worthy question is what happens after an unexpected exit. Vance couldn’t hold it together, carry on as if Trump and as far as Xi and Putin, god only knows what would happen.

by profile | 3rd Apr 25, 8:33am 1743622393

"...attribution studies are presently unable to claim that human-created greenhouse gas emissions have increased flood magnitude. We show that flood magnitude was significantly higher before the 20th century, despite there being a negligible greenhouse gas contribution from humans, which means that natural variability might be significantly higher than assumed by climate modellers. This has profound implications for flood planning and climate adaptation policy, as many recent floods cannot be viewed as unprecedented, even in the historical record."

https://link.springer.com/article/10.1007/s10584-025-03904-9

by Yvil | 3rd Apr 25, 10:44am 1743630243

Is there any truth to the claim that Putin is conscripting 160,000 more young men (= forcing them) to join the war in Ukraine? If true it's like giving Trump the middle finger about his "peace deal".

by murray86 | 3rd Apr 25, 11:25am 1743632730

I've seen the reports. Last time he did that he effectively created a new export industry of Russian youth trying to avoid the Ukraine meat grinder.

there has to be a lot or risk for his regime doing that though. These new troops hit Ukraine and learn that what they were told is likely a lot less than the truth. It's already been happening to an extent through desertions, and other reported heavy handed treatments to control their troops such as on the spot executions to establish examples for disobedience.

by Foxglove. | 3rd Apr 25, 11:37am 1743633469

Recall in Beever’s “Stalingrad” a lieutenant in charge of a platoon for less than an hour was shot because two soldiers from the platoon had deserted the during the previous night. Stalin’s text book gathers no dust it would seem.

by murray86 | 3rd Apr 25, 11:54am 1743634463

Yes and I would wager Putin has learnt from it too. He would empower his officers to apply it at will pretty much. But then Viet Nam also taught any military officer that if they want to ride their troops hard and noticeably don't care if they live or die, then they shouldn't necessarily expect restful sleep within range of those troops!

by Let me be Frank | 3rd Apr 25, 1:53pm 1743641616

Is a bi annual event apparently...though a bit larger than last time. Those who have served their term are supposed to be released (if still alive) and whether that happens or not who would know.