Adam Sharman, CEO LMAC Group APAC

 

Tariff turbulence: Understanding the impact on kiwi manufacturers.

As trade tensions escalate globally, through the introduction of heavy tariff from the U.S. New Zealand manufacturers find themselves navigating increasingly complex waters.

The United States is one of New Zealand’s key export markets worth approximately NZ$9 billion annually, and New Zealand products provide key components in other countries’ supply chains into the USA.

The ripple effects of U.S. tariff changes extend far beyond simple price adjustments. When tariffs increase, manufacturers face immediate margin pressure, but also longer-term strategic questions about market positioning and investment priorities.

For New Zealand’s primary sector, dairy processors, which have developed specialised ingredients for U.S. food manufacturers, tariff increases could undermine carefully cultivated market positions.

Similarly, premium meat exporters who have invested heavily in sustainability certifications and farm-to-table traceability to command premium pricing, could see their value propositions challenged.

The impact extends beyond agricultural processing. New Zealand’s high-tech manufacturing sector, including medical device manufacturers and precision agricultural equipment producers, faces similar challenges.

For organisations that have established niches in specialised global supply chains where even modest tariff increases could significantly alter competitive dynamics, a focus on IP protection and maintaining certifications required for market access, for example in aerospace, pharmaceuticals and defence help protect market position, and reduce price sensitivity.

Strategic pivot: Capitalising on trade war opportunities

While tariff increases present challenges, they also create strategic opportunities. As tensions escalate between the United States and other major trading blocs, particularly Europe and China, New Zealand manufacturers could benefit from “tariff arbitrage” – situations where Kiwi products become relatively more competitive due to higher tariffs on competitor nations.

Exporting organisations are required to think differently about their global market positioning, both in terms of direct market tariffs and the relative position with respect to global trade dynamics.

Whilst this is not a new concept, the volatility introduced through the USA’s latest tariffs require organisations to develop both risk and opportunity response plans that maintain market position and capitalise on market opportunities create by trade tensions between other, competing regions.

For example, with higher tariffs on European meat products into the U.S. market, New Zealand dairy producers should be ready to step in with expanded production and distribution capabilities as New Zealand products become relatively cheaper by comparison.

This requires maintaining production flexibility and strong relationships with American distributors who may suddenly seek alternative suppliers.

Efficiency imperative: Protecting margins through production excellence

Even given the potential opportunities created by shifting trade dynamics, margin erosion is a likely consequence for exporting New Zealand manufacturers as price pressure for their produces in market increase and cost of materials increase.

With geographic isolation already imposing a “distance tax” on exports, companies must double-down on operational efficiency to maintain margins even when facing tariff headwinds.

Successful manufacturers are those taking a holistic approach to efficiency. Organisations that focus on all aspects of their operation from material use and product design to production and logistics to optimise productivity when cash flow is constrained, and big plays are out of reach will be those that are running whilst others are crawling as the markets settle.

This means, optimisation of production efficiency to maximise capacity and reduce cost to manufacture, optimisation of supply chain efficiency to reduce material cost and stock held, and optimising process quality to minimise waste and rework.

Whilst these focuses should be a continual focus, it is easy to let them slip when demand is high. However, an unrelenting focus on operational efficiency is a critical foundation for agility and resilience in an uncertain world.

Conclusion: Building resilience in an uncertain world

U.S. tariff policies represent just one aspect of what business strategists increasingly describe as a VUCA (Volatile, Uncertain, Complex, Ambiguous) or BANI (Brittle, Anxious, Non-linear, Incomprehensible) operating environment.

For New Zealand manufacturers, success increasingly depends on developing organisational capabilities, flexibility and efficiency that foster resilience regardless of specific trade policy outcomes.

The manufacturers who will thrive are those building adaptive, resilient organisations who can move quickly to respond to price fluctuations and changing market access requirements.

This means cultivating scenario planning capabilities, maintaining robust market intelligence functions, and developing diverse sourcing strategies. It also requires closer collaboration throughout supply chains to ensure rapid response to market shifts.

Fundamentally, it means being as efficient as possible in production to maintain margin in good times and bad, to ensure capacity and resource levels that allow for a rapid response.

As Kiwi manufacturers navigate this complex landscape, the most successful will maintain their traditional strengths – quality production, innovation, and supply reliability – while rapidly developing new capabilities focused on agility and adaptation.

Those who view tariff challenges as opportunities to build more resilient organisations may ultimately emerge stronger, regardless of how specific trade policies unfold.