How do tariffs work & tips to weather international trade tensions in NZ

Tariffs, essentially taxes imposed on imported goods, are a fundamental tool in the world of international trade, capable of significantly shaping global commerce.

In recent years, their impact has been underscored by the United States' assertive trade policies, particularly under President Donald Trump's leadership. In 2025, the U.S. implemented a 10% universal tariff on most imports, including those from New Zealand¹, as part of a broader strategy to reduce the U.S. trade deficit and boost domestic manufacturing. While New Zealand has thus far avoided more severe tariffs, the threat of increased duties on key exports remains a concern.

For economies like New Zealand, where agriculture and manufacturing contribute significantly to national wealth, such trade tensions can have tangible effects on businesses navigating international markets. In 2023, New Zealand's total exports of goods amounted to approximately US$41.4 billion², a figure that underscores the nation's reliance on smooth and predictable international trade.

Fluctuations and disruptions caused by tariffs can directly impact the profitability and competitiveness of these crucial export sectors. This article will delve into the mechanics of tariffs, explore their potential impacts on businesses, and provide practical tips on how enterprises can strategically respond to and weather the storms of international trade tensions.

What are tariffs and their impacts?

At its core, the definition of a tariff is a duty or tax levied by a government on goods imported from another country. Its meaning in the context of international trade is multifaceted, serving various purposes, from protecting domestic industries to generating revenue for the importing country.

However, the imposition of tariffs can have significant and often negative impacts on businesses involved in international trade. One of the most immediate effects is increased costs. Tariffs directly raise the price of imported goods, which can squeeze the profit margins of businesses that rely on these imports for production or resale.

This can lead to reduced competitiveness in the global marketplace, as businesses in countries facing tariffs may find their products becoming more expensive compared to those sourced from nations without such levies. Furthermore, tariffs can also lead to supply chain disruptions.

Businesses that have established intricate international supply chains may find these networks fractured as tariffs make certain sourcing options economically unviable. Ultimately, the question of who pays tariffs is complex. While initially levied on the importing company, these costs are often passed on, at least in part, to the end consumers in the form of higher prices for goods and services.

How can businesses respond to these impacts?

Now that we have covered what tariffs are and how they work, let's explore actionable strategies that New Zealand businesses can implement to effectively respond to their impacts.

Navigating the complexities introduced by tariffs requires a proactive and adaptable approach. Businesses can employ several strategies to mitigate the negative impacts and build resilience in the face of trade tensions.

Assess your supply chain to identify vulnerabilities

A crucial first step is to thoroughly evaluate your existing supply chain. Understand where your raw materials, components, and finished goods originate. Identify dependencies on suppliers located in regions that are currently or potentially affected by tariffs.

This assessment will highlight areas of vulnerability and allow you to address potential risks proactively. A key strategy to mitigate these vulnerabilities is to diversify your supplier base. Explore alternative sourcing options in countries that are not subject to the same tariffs. While this may involve initial costs and adjustments, reducing reliance on tariff-affected regions can provide greater stability and flexibility in the long run.

Evaluate your pricing strategy and adapt to market changes

The imposition of tariffs often necessitates a review and potential adjustment of your pricing strategy. Businesses need to carefully identify and quantify the direct impact of tariffs on their product costs. This involves calculating the additional duties payable on imports and exports.

Once the cost impact is understood, explore strategies for cost reduction and efficiency improvements within your own operations. This could involve streamlining production processes, negotiating better rates with other suppliers, or optimizing international logistics.

When considering pricing adjustments for your products, it's vital to strike a balance between absorbing some of the increased costs to remain competitive and passing on a portion to customers. Clear and transparent communication with your customers about any necessary pricing changes is essential for maintaining trust and understanding.

Strategize trading partners

In a global landscape marked by trade tensions, the strategic selection of trading partners can offer significant advantages. New Zealand's Prime Minister Christopher Luxon has recently emphasized the importance of Indo-Pacific nations deepening their economic integration through free trade and strengthened supply chains³.

This highlights the potential benefits of leveraging free trade agreements (FTAs). Businesses should actively explore sourcing materials and expanding their presence in regions that have existing FTAs with New Zealand. These agreements often eliminate or significantly reduce tariff burdens, providing a competitive edge and greater predictability in international trade.

By strategically aligning with countries that have favorable trade relationships with New Zealand, businesses can mitigate the impact of broader global trade tensions.

Stay informed about policy changes

The landscape of international trade policy is dynamic, with regulations and tariffs subject to change. Therefore, it is crucial for businesses involved in import and export to establish mechanisms for diligently monitoring trade policy updates and regulatory changes.

Staying informed about potential new tariffs, changes to existing tariffs, and evolving trade agreements will allow businesses to anticipate and proactively manage the potential impacts on their operations. Subscribing to relevant trade publications, engaging with industry associations, and utilizing resources provided by government agencies can help businesses stay ahead of policy changes and make informed decisions.

Weathering the trade winds: Strategies for success

While international trade tensions and the imposition of tariffs can create uncertainty and challenges, businesses equipped with the right strategies can effectively navigate these turbulent waters and even thrive.

Proactive assessment of supply chains, adaptable pricing strategies, strategic engagement with trading partners, and staying informed about policy changes are crucial steps towards building resilience. Furthermore, business partners, such as experienced international logistics providers, can make a significant difference in managing the complexities and costs associated with international trade.

DHL Express, with its deep expertise in customs regulations, trade compliance, and global logistics, acts as a vital partner for businesses navigating the intricacies of tariffs on imported goods. Our comprehensive services are designed to help businesses ensure continuity in their worldwide operations, providing guidance on customs procedures, ensuring compliance, and optimizing supply chains.

To leverage this expertise and confidently navigate the evolving landscape of global trade, we encourage businesses to open a DHL Express business account today to take advantage of our comprehensive suite of services.