“Horrible.”
This is the word the New Zealand Institute of Economic Research (NZIER) is using to describe the impact a Donald Trump victory would have on the New Zealand economy.
The institute, in a note released today (Thursday), says the prospect of Trump becoming US President should worry New Zealand firms.
“If Trump beats the odds and emerges victorious, we expect significant instability in financial markets,” NZIER deputy chief executive John Ballingall 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.”
The NZIER maintains if Trump enacts his economic policy campaign promises, the US economy is likely to grow slower in the medium term.
“One estimate is that Trump’s policies will see 4.8 million job losses. A weaker US economy will have a negative impact on the $8.4 billion of goods and services we sell to the US. This will be of particular concern to the meat, dairy, wine, wood and tourism sectors,” Ballingall says.
The NZIER also notes Trump has promised to impose huge tariffs on Chinese and Mexican imports, and rip up trade agreements like NAFTA and TPP.
Furthermore, he says he isn’t a fan of multilateral institutions like the World Trade Organisation and United Nations.
“This is the biggest area of concern for New Zealand in the long term. We benefit enormously from a stable global trading environment,” Ballingall says.
The NZIER believes that under a Trump presidency, the chances of further Asia-Pacific regional economic integration are reduced and the trade barriers facing Kiwi exporters are more likely to remain.
“Trump is delivering a message that the US will do what it likes, and bugger the consequences for everyone else.
“We are looking at much more isolationist and protectionist US trade and foreign policy settings. That’s not good for the US economy or the global economy, and definitely not good for the New Zealand economy,” Ballingall concludes.
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