Published on the 10/04/2025 | Written by Heather Wright

Trading on up: The tariff impact…

“This is a period of unprecedented opportunity for local businesses, and tech businesses in particular – a once in a lifetime opportunity – and we should be less concerned about the downside and instead be thinking about what advantages it has created for us.”

Greg Shanahan, managing director of The Technology Investment Network (TIN) is talking about the direct impact of the 10 percent tariffs the United States has slapped on New Zealand and Australia and, more specifically, the falling dollar.

“Wow. It’s never been a better time.”

Companies on both sides of the Tasman have been rushing to understand the impact on the tariffs on their respective businesses.

US president Donald Trump raised the tariff rate on China to 125 percent on Thursday, and announced a 90-day pause on the tariffs for most countries. The announcement saw markets soar with stocks in the ‘magnificent seven’ – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – amassing more than US$1.5 trillion in market value (though not enough to completely erase the around US$2 trillion they’ve lost since the tariff announcements last week, or the $3.4 trillion they’ve shed since late 2024).

Australian Prime Minister Anthony Albanese was scathing of the tariffs, saying they were ‘not the act of a friend’. He reiterated those comments following the pause, saying they were an act of ‘economic self-harm’.

In New Zealand the government has said the direct impact on the New Zealand economy from the US tariffs will likely be around $900 million – around 0.2 percent of GDP.

Morningstar says most Australian software companies won’t take a direct hit.

“They typically have high-quality customers and recurring revenue,” the investment research firm company says.

Exceptions, however, include Xero and SiteMinder, which ‘have more economic sensitivity’.

Xero has so far remained quiet on the tariffs.

Rakon, which generates around 15-20 percent of its revenue from direct US sales, says disruption of this scale brings ‘potential opportunities’.

Around 85 percent of Rakon’s manufacturing is done in New Zealand, with some manufacturing in France, which is subject to a 20 percent tariff, and India, which is being hit with a 26 percent tariff will be 26 percent.

“As a nimble Kiwi innovator with a global operational footprint and leading technology, Rakon is well-positioned to optimise its manufacturing and adapt to the changing conditions,” the company said in an NZX announcement.

It says it’s still working to understand the implications and is seeking clarification on implementation and possible exemptions.

Scott Technology is also playing down potential impacts, saying the current revenue mix that would be exposed to tariffs is less than 10 percent.

“The more significant and broader impact will be the uncertainty this creates in the global economy and businesses willingness to invest in capital equipment.”

It too, believes the tariffs open the door for potential opportunities – particularly where European and Asian competitors face higher tariff rates than Scott Technology’s exports from New Zealand or Australia to the US.

Shanahan is equally optimistic, saying the current environment offers big opportunities for local exporters but also for local companies looking for investment – he believes a recent increase in the number of acquisitions has been partly accelerated by the currency changes.

He says the scale of the tariffs will be ‘neutralised’ for many by currency benefits with the New Zealand and Australian dollars tumbling post ‘Liberation Day’.

“If you go back to the early 2000s, where the dollar was hovering around 42 cents and above, it was a period of significant opportunity with growth in the United States for Kiwi manufacturers,” he notes.

A key reason for New Line Cinema’s deal with Weta for the making of the Lord of the Rings trilogy, was the realisation that they could make three movies in New Zealand for the price of one.

North America accounted for $4.3 billion of the $13.5 billion in revenue for New Zealand’s top 200 tech companies last year. But the North American market growth has slowed, with growth in other regions coming on strongly.

“The US isn’t the only market for local companies.”

The local market has also changed, with the tech sector in particular a ‘totally different beast’ to how it was 10-20 years ago with more $200 million+ revenue companies, and a market much more integrated into the global economy.

“This year TIN forecasting will be around 20 companies with revenue over $200m and many of those companies are exposed to the US,” Shanahan says.

“All of a sudden they get a bump in revenue, their costs in US dollars have gone, their margins have increased, they’ve got the opportunity to put people on the ground and make a distributor’s margin as well as a manufacturer’s margin, for those who are using just agents.

“It’s really a time for local tech companies to sit back and ask what they’re going to do about things in terms of strategic advantage.”

Uncertainty and chaos are traditionally good for technology, he notes, with receptiveness to new ideas and innovation higher.

“The biggest challenge to getting into a market is a complacent status quo who will defend their patch with enormous resources, no matter what. Now, across the world people are questioning whether they can afford to do business in the same way or use these solutions.

“People are opening their eyes to what their cost structures are and revisiting in a way that they wouldn’t in better times.”

A prevalence of B2B tech businesses, and growth areas of fintech and healthtech which are less affected by discretionary spend, will also provide some insulation for New Zealand.

Shanahan says there’s also potential for local companies to bring manufacturing back to New Zealand and Australia to capitalise on the lower tariffs the two countries have been hit with.

When Covid hit, companies such as Fisher & Paykel Healthcare were forthright that they had choices in terms of manufacuting in New Zealand or, in F&P Healthcare’s case, Mexico, which is now facing a 25 percent tariff. (Almost all of the company’s products sold into the US from Mexico are compliant with the US, Mexico and Canada trade agreement.)

For consumers, the future might be less clear. Large amounts of consumer tech is assembled in China, from Chinese componentry, with Vietnam and India also growing tech markets. However, most US companies have the ability to supply local consumers via distribution hubs or subsidiaries in free trade markets, with other companies who don’t already have that ability flagging that they’re looking at establishing centres outside the US to ship to non-US customers.

There’s another reason too, to be optimistic, Shanahan says.

“At a very helicopter level, the world is shaking a bit with growing competition for dominance of major markets.”

Competition in areas such as EVs is heating up, with the likes of China’s BYD trying to muscle in on Tesla.

“The world is shuffling the chairs in the marketplace and that pricing competition will be good for consumers.”

Of course, there are the wider issues of potential trade wars, the impact of economic uncertainty and higher costs creating a drag for the global economy.

“The biggest issue is really where is this all going? But if you focus on the things that are just relevant to you, and where you can move the dial, wow, it’s never been a better time,” Shanahan says.