Expert warns of possible US-China trade war and what it means for NZ agriculture

A visiting expert has delivered a stark warning to farmers, urging them to make sure they're in a position to cope with any fallout from US-China relations

Michael Every, Rabobank's head of financial markets research for Asia-Pacific, said the trade conflict is developing into a 'cold' war for global economic supremacy.

"With this threat on the horizon, New Zealand's agricultural sector should aim to reduce its reliance on individual trade partners and place an increased focus on diversification of its export markets," he told Newshub.

He expects the international situation to deteriorate further.

"The clash between the US and China is not going away. It's not an aberration, it's going to get worse."

Increasing tensions could produce a scenario where New Zealand is forced to pick a side between the two global superpowers.

"China is aggressively pursuing trade expansion and there may come a time when a gun is put to New Zealand's forehead and you'll be asked are you with us, or are you with the US," Mr Every warns.

"If you answer the US, the Chinese could slam the door shut."

An ultimatum from either country would place New Zealand in a perilous position given our significant trade ties with both countries, he says.

Michael Every says the agriculture sector could get caught up in a trade war between the US and China.
Michael Every says the agriculture sector could get caught up in a trade war between the US and China. Photo credit: Supplied

New Zealand's agricultural exports to China have grown rapidly in recent years, and China is now our most important trading partner.

We also have a significant trade relationship with the US, as well as historically strong diplomatic and cultural ties.

Mr Every says Kiwi farmers and exporters should look to diversify offshore markets before any concessions are demanded by the US or China.

"New Zealand's agricultural sector should be looking to further develop links into new growth markets like Japan, Indonesia and India," he explains.

"While this may take a lot more effort in the short-term, it will leave agricultural exporters in a better position should the US or China start making demands down the track.

"New Zealand needs to look at it as an opportunity, rather than a threat, and ask 'what brand can we build for agriculture that allows us to thrive?' because trade protectionism won't go away."

Mr Every says with increased market volatility likely, New Zealand farmers should also be taking a closer look at their balance sheets.

"Farmers would be wise to shore up their balance sheets so they are robust enough to cope with a scenario where one of New Zealand's major trading partners withdraws from the market."