By Jo Moir, of RNZ
11:36am

The Prime Minister will speak with world leaders on the phone on Thursday
about the new trading environment as the United States retaliates against
China by hiking tariffs to 125%.

US President Donald Trump announced on Thursday (NZT) he would be putting a 90-day pause on retaliatory tariffs for other countries, but the stock
markets remain volatile as the two superpowers continue to battle it out.

Luxon spoke to a business audience of more than 200 in Wellington on Thursday morning where he sought to assure chief executives and leaders about what may lie ahead for New Zealand in what is now a tit-for-tat trade war between
China and the United States.

"The events of recent days are the most significant challenge to the rules-based trading system since the General Agreement on Tariffs and Trade (GATT) was formed in 1947," Luxon said.

"Action, reaction, and response have shocked financial markets.

"As the Minister of Finance highlighted earlier this week, the direct impact
on the New Zealand economy from the US tariffs announced last week is likely
to be around $900 million or roughly 0.2%of GDP."

"But the second order consequences of a region and a world retreating from trade and increasingly uncertain about its economic future will be more significant, despite the welcome news of de-escalation this morning," he said.

"I know for many businesses keeping an eye offshore and for those New Zealanders watching their KiwiSaver accounts, that could be confronting."

Luxon said he wasn't ready to "throw in the towel" just yet and declare an
end to the era of free markets and a rules-based international order.

That meant working with like-minded trading nations to keep making the case
for both.

The strength of the CPTPP, which includes a dozen countries from New Zealand and Australia, through much of Asia, and to the United Kingdom, would now
look to also work with the European Union to "champion rules-based trade".

"Collective action, and a collective commitment, by a large portion of the global economy would be a significant step towards preserving free trade
flows and protecting supply chains," he said.

Clearly that won't be enough on its own, and Luxon said that was why he was joining a call with other world leaders today to compare notes on world trade and "test what we can do together to buttress the rules-based trading system".

"And it's why I will be heading to the United Kingdom later this month to
meet Prime Minister Sir Keir Starmer, to talk trade, security, and the geopolitical backdrop in Europe and the Indo-Pacific.

We can't make the case for New Zealand sitting at home," he said.

rnz.co.nz

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