With Donald Trump securing a second term, the global economy is bracing for significant shifts. While some countries may struggle under his policies, New Zealand could potentially benefit from Trump’s aggressive trade measures, particularly his approach to tariffs. However, there are also risks involved, especially if the U.S. economy heads into a recession.
The Difference Between Trump 1.0 and Trump 2.0
Trump’s first term was characterized by a strong focus on the stock market, often referred to as the “Trump put.” He was deeply invested in keeping Wall Street buoyant, using tax cuts and deregulation to stimulate economic growth. However, his second term presents a stark contrast. Trump 2.0 appears to be focused on tackling the U.S. debt, which has now surpassed $36 trillion. Unlike past governments that have merely postponed addressing this issue, Trump is actively looking to cut costs and increase revenue.
Cost-Cutting and Its Global Implications
One of the first significant moves in his second term has been the reduction of government spending. The Department of Government Efficiency (DOGE) has already laid off tens of thousands of government workers, and further cuts are expected. Trump is also pushing to end costly foreign conflicts, such as the war in Ukraine and the crisis in Gaza, opting instead for negotiated truces. This shift will have widespread geopolitical and economic consequences, particularly for countries reliant on U.S. military and financial support.
Revenue Generation: Tariffs, Immigration, and Trade Negotiations
To boost revenue, Trump has introduced policies like the $5,000,000 Gold Visa, which is expected to take effect from September 26, 2026. This policy aims to attract wealthy immigrants willing to invest in the U.S., a model that could inspire similar strategies in other countries, including New Zealand.
Another major revenue source will be tariffs. Trump has long criticized America’s trade deficit, particularly with China, which stands in the hundreds of billions. Surprisingly, his current tariffs on China are only 10%, but this is expected to rise significantly. Trump has also demanded that China purchase more American goods—possibly doubling its current imports—yet this demand faces obstacles, such as restrictions on the sale of advanced technology like GPUs to China. Additionally, the U.S. will push Chinese companies to set up manufacturing plants within American borders, leading to tense negotiations.
The Current Challenges Trump is Facing
Despite his bold plans, Trump’s second term has not been without its challenges. One of the major hurdles has been his inability to resolve the ongoing conflict between Russia and Ukraine in a short time frame, despite Ukraine having already made significant concessions. The situation remains tense, with Trump’s attempts to broker a truce continuing to face significant resistance from various parties. This could hinder his broader geopolitical goals and impact global stability.
Additionally, Canada has proven to be a tough opponent in the tariff war, fighting back strongly against U.S. trade measures. However, the political landscape in Canada may shift after their upcoming elections, which could potentially improve trade relations between the two countries and lead to a more cooperative approach toward tariffs.
Trump’s Push for European Defence Spending
Trump has also called on European countries to significantly increase their defence spending, urging them to purchase military weapons from the U.S. In response, tensions between Europe and America have risen, but Europe has begun taking action. Some European manufacturers, historically focused on automobiles, are now shifting their production to military weapons in line with increased defence budgets. This change, coupled with Europe’s announcement of higher defense spending, has led to a shift in capital flows. We are now witnessing more capital moving out of the U.S. and into Europe as the continent strengthens its military capacity.
Shifting Capital Flows: U.S., China, and Japan
The global capital landscape is also changing. With China’s technological breakthroughs and the U.S. government’s efforts to prop up the stock market in order to stimulate the economy, we are seeing significant capital flows out of the U.S. and into China and Japan. As these economies present growing opportunities, especially in technology and innovation, investors are diversifying their portfolios away from the U.S. and into these emerging markets.
Additionally, China and Japan—the two largest holders of U.S. Treasury bonds—have recently stopped purchasing these bonds. This has reduced the demand for U.S. debt, further complicating efforts to manage America’s massive fiscal deficit. The drop in demand for U.S. bonds could lead to higher borrowing costs for the U.S. government and contribute to economic instability, impacting global financial markets.
How New Zealand Could Benefit
New Zealand’s trade with the U.S. is relatively small, with a trade deficit of just over $1 billion. While New Zealand’s total exports to the U.S. are not substantial compared to major economies, a significant portion of New Zealand’s exports to the U.S. is agricultural—including dairy, meat, and wine. These industries could stand to benefit if trade flows shift and if U.S. tariffs on China lead to greater demand for goods from New Zealand, particularly agricultural products that the U.S. needs to import.
Furthermore, as global instability rises, New Zealand’s reputation as a safe and politically neutral destination becomes even more attractive. The New Zealand government recently introduced a new investor immigration policy, making it easier for wealthy individuals to move to the country. This could result in an influx of foreign capital, boosting local investment and stimulating economic growth. With the increasing interest in New Zealand, more capital could flow into the country, ultimately lifting house prices as demand for housing increases.
The Risks: A U.S. Recession
Despite these potential benefits, New Zealand is not immune to the risks of Trump’s policies. If his aggressive cost-cutting and revenue-boosting measures fail, the U.S. could slide into a recession. Given the deep interconnections of global markets, this would inevitably impact New Zealand’s economy as well. A weaker U.S. economy could reduce demand for New Zealand exports and lead to increased volatility in global financial markets.
Conclusion
Trump’s second term presents both opportunities and risks for New Zealand. On one hand, we could benefit from shifting trade patterns and increased investor interest. On the other, a U.S. recession could negatively impact our export-driven economy. While the world watches how Trump 2.0 reshapes global trade, New Zealand must remain strategic and adaptable to navigate these changes effectively.
