Opinion: How a Donald Trump re-election might impact the New Zealand economy

  • 02/11/2020
Dr Pushpa Wood and President Donald Trump.
Massey University director of financial education Dr Pushpa Wood looks at the impacts if the US President is re-elected. Photo credit: Supplied/Getty.

By Dr. Pushpa Wood, director, Massey University Financial Education and Research Centre. 

Opinion: With the US election just two days' away, CNN's current presidential poll indicates former vice president Joe Biden is ahead of current President Donald Trump, at 52 percent.

As COVID-19 cases climb higher in the US, Biden is promising to bring the virus under control. If he becomes President, it's hoped the US/China relationship would improve. This would increase confidence among US trading partners, including New Zealand.

Under President Trump's reign, tensions between the US and China, and COVID-19 cases, have risen.  Over 200,000 Americans have now died from COVID-19 (236,471 as at November 2). Over the last week, there were an average of 80,510 cases per day.  

As the world's largest economy by nominal GDP (16.1 percent in 2019 according to the World Bank), the US economy has a worldwide impact. Rising COVID-19 cases and deaths affect confidence. Ongoing US/China conflicts may affect foreign trade policy. 

As Trump's defeat isn't a foregone conclusion, here are three ways New Zealand could be affected by a second Trump term. 

1. Prolonged global recession

To-date, America doesn't appear to have a handle on the COVID-19 pandemic. On October 30, the number of new daily cases tipped 100,000. The latest update on November 1 shows 55,895 new cases.

A study on global behaviours and perceptions by the Centre for Open Science across over 170 countries after COVID-19 lockdown from March 2020 showed the trust level in the American Government was low. Massey University analysis shows just 10 percent of US respondents felt their Government reaction to COVID-19 was appropriate and 16 percent trusted their Government and found them truthful. 

According to World Bank forecasts, the global economy will shrink 5.2 percent this year, marking it the deepest recession since the Second World War.  

If COVID-19 infection and death rates continue at current levels, pockets of US society are likely to be significantly impacted. The US could fall further into recession, affecting confidence worldwide. Possible flow-on effects are share market falls and volatility, prolonged loss of tourism and pressure on trade policies. 

2. Tensions between US and China affecting trade  

Under the Trump Presidency, tensions have accelerated between the US and China. 

Although the surge in COVID-19 cases has helped New Zealand exports so far, if the US/China trade war is ongoing and the rhetoric of 'buy American goods' rises, new expectations could put pressure on New Zealand trade policies.

Economist Shamubeel Eaqub confirmed in the year-to-date, the US is New Zealand's third-largest export destination. The country takes around 10 percent of New Zealand exports, worth $5.6 billion last year. Examples are meat, dairy (whey), respiration equipment, wine, Kiwifruit, mussels and salmon.

Although the US election outcome isn't likely to affect New Zealand exports, a second term under Trump could mean that politically, America's expectations change. As a result, New Zealand may be required to rethink its policies around trading partners.

3. Immigration demand 

Whenever there's tension in the world, New Zealand tends to be seen as a 'safe pair of hands'. 

If Trump is re-elected, we could potentially see more Americans dissatisfied with their Government wanting to immigrate to New Zealand. This could be New Zealand's gain, in which case the current quota could be reviewed. But it could equally have a downside.

With New Zealand's 'go hard and go early' approach, the country isn't as badly affected by COVID-19 as other parts of the world. But if borders are re-opened, being such a small country, the potential impact could also be greater.

Overall, my biggest concern with the Trump presidency is the view that COVID-19 is not going to make a difference to America. 

The decision made by American voters on November 3 will have a considerable impact not just on America, but also on the rest of the world.