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Major conflict has broken out in the Middle East, following Israeli and US airstrikes against Iran, and followed by retaliation by Iran against both countries, as well as others in the region.

This analysis was first published for Infometrics clients, and was then made publicly accessible following a request to republish by Interest.co.nz.

There has been endless news on the current unprecedented trade war between the US and the rest of the world. The effects on US consumers and the US economy should not be understated, and forecasts incorporating current policy paint a depressing outlook for the US.

The fallout from the trade war has stolen headlines over the past week, as Kiwis worry about their plummeting KiwiSaver balances amid the global share market selloff. One of the key questions that always emerges from a major global economic event is “what does this mean for interest rates?”

The primary sector remains an important driver of economic activity in 2025, with generally rising export values across a number of areas. Despite clear risks to global growth, exporters have substantial momentum behind them at current.

We are increasingly looking to grow our international relationship with India, as demonstrated by Prime Minister Christopher Luxon’s recent visit.

Export prices are sitting in a strong position, with healthy demand for New Zealand products across the world and healthy supply here at home. Higher dairy production and a record pay-out will inject an additional $4.5b into the economy in the current season, and meat prices have strengthened over the second half of 2024 too. Horticulture exports are in a strong position too, with rising kiwifruit exports after a tough earlier season, and apple exports have recovered well too after Cyclone Gabrielle.

President Trump’s “on-again, off-again” tariffs, and the uncertainty associated with them, have thrown financial markets into a tailspin over the last couple of months. Although New Zealand is not directly in the firing line from tariffs yet, it’s a possibility in coming weeks.

US President Donald Trump has imposed a series of tariffs upon major US trading partners to encourage more American manufacturing, as well as to pressure its neighbours to shore up border security to prevent illegal immigrants and fentanyl entering the US.

Rapidly declining export prices have ramped up the pressure on New Zealand exporters and pushed our terms of trade to a seven-year low. Export prices were down by 13%pa in the December 2023 quarter, the largest annual decline since 2009. In comparison, import prices fell a much smaller 2.2%pa.