New Zealand‘s fragile economic recovery is facing a significant setback as escalating global trade tensions are projected to drastically reduce the nation’s growth trajectory. A recent report by leading economic think tank Infometrics expects the country’s annual GDP growth to decline by more than half in 2026, dropping from an earlier forecast of 2.4 percent to just 1 percent.
Infometrics’ chief forecaster, Gareth Kiernan, highlighted that while many New Zealanders may not experience a direct impact from trade policies implemented by the United States, the broader consequences of a global economic slowdown could have widespread implications for the domestic economy. Key sectors such as the labor market and the housing industry are particularly vulnerable to the ripple effects of declining international trade and investment flows.
“The timing of this global instability could not be more detrimental, especially as New Zealand was beginning to recover from two years of economic stagnation,” Kiernan explained. He warned that the country’s export sector, which has traditionally been a key driver of economic performance, is likely to be severely hampered by weakening international demand and increased production costs associated with global tariffs.
As global trade barriers rise and geopolitical uncertainty mounts, New Zealand’s export growth is expected to taper off, potentially reaching zero growth over the next 18 months. This decline in export performance is anticipated to dampen business confidence, with companies adopting a more cautious approach toward investment and recruitment. Additionally, consumers are likely to restrain their spending, contributing to an overall slowdown in economic activity.
Kiernan also pointed out that the unpredictable nature of trade negotiations and the fluctuating status of tariff implementations are creating an unstable environment for both local and international businesses. “The sporadic and inconsistent application of tariffs is making it increasingly difficult for firms to make long-term investment and employment decisions,” he noted.
The global trade conflict, particularly between the United States and China—the world’s two largest economies—is intensifying fears of a potential global recession. Kiernan emphasized that the broad 10 percent tariffs imposed by the United States on all imports, combined with even steeper levies on Chinese goods, are expected to hinder economic growth significantly across major markets.
For New Zealand, the implications extend beyond trade and investment. A depreciating New Zealand dollar, coupled with the potential for increased imported inflation, may push the national inflation rate up to 2.8 percent later this year. This inflationary pressure poses additional challenges for the Reserve Bank of New Zealand, which may be forced to adjust monetary policy to maintain economic stability.
“In response to the deteriorating economic outlook, we anticipate the Reserve Bank will lower the official cash rate to 3 percent by July,” Kiernan stated. However, he cautioned that any further interest rate reductions would be contingent on inflation expectations aligning more favorably with long-term targets.
In summary, New Zealand’s economic prospects are facing renewed challenges amid rising global trade tensions. The cascading effects of reduced export growth, diminished investor confidence, and higher inflation risks are likely to hinder the nation’s recovery efforts. Policymakers and businesses alike may need to brace for a period of increased volatility and adapt to a more uncertain global economic landscape.
