Analysis: The one-off $2.6b NZ spent on buying American planes, parts and propellers last year was what’s saved our exporters from being hit with more than $2b new Trump tariffs every year.

I’m going to take a bit of a flier with this. But if it weren’t for the Defence Force and Air NZ, New Zealand’s 2024 bilateral balance of trade with the US would look markedly different – at enormous cost to the economy.

The Air Force and other aircraft operators bought NZ$2.6b of planes, aircraft parts and jet engines from America last year. That trimmed the trade deficit, from the White House perspective, to just NZ$1.9b (US$1.1b).

And that, utterly irrationally, is how Donald Trump measures trade barriers – he assumes that if New Zealand buys fewer US goods than it sells, then we must be placing unfair trade barriers in the way of US exports. He can’t conceive that actually, we produce goods that America wants to buy.

That’s perhaps why the US has also been so interested in New Zealand’s long-overdue Defence Capability Plan, and encouraging NZ to take a greater role in maritime patrols of the south Pacific. This would require new planes and boats. Purchased from America.

NZ has already ordered four long-range Boeing Poseidon P-8 aircraft at a cost of NZ$2.3b. But when the Capability Plan is finally published, it’s expected to at least include the replacement of several of the Navy’s ageing ships, and the Air Force’s troubled Boeing 757s.

Without last year’s aircraft and engine purchases, Trump would have (misguidedly) looked at the far bigger trade deficit and concluded that New Zealand was placing 45 percent tariffs and trade barriers on American imports.

And on that basis, he’d have imposed about 23 percent tariffs on all the meat, dairy, wine and other goods we export to the US – pushing up producers’ tariffs exposure to $2.07b a year.

It’s just more evidence of how arbitrary these tariffs are. As Sense Partners economist John Ballingall mischievously argues, all New Zealand needs do is buy a couple more planes or ships from the US, and the trade deficit will be eliminated – and then so too should be our tariffs.

Assuming the ‘Liberation Day’ exercise were in any way rational.

How else might we rebalance the trade ledger in a way that keeps Trump happy? America’s big pharma manufacturers have dined with Trump at Mar-a-Lago, and argued for him to take action against countries that have national drug-buying schemes like Pharmac. Sources say the American medicines companies loathe Pharmac with a particular passion; we bought $245m of drugs from them last year, but they think that spend could be much bigger.

But New Zealand’s bipartisan political consensus around the Pharmac model, which keeps medicine costs down for New Zealanders, would make any major change an unpalatable political sacrifice.

America’s pig farmers want us to loosen biosecurity controls so they can sell more than last year’s $60m of pork to New Zealanders – changing those rules seem a little more likely, given biosecurity minister Andrew Hoggard is taking advice on the matter.

If New Zealanders were to stop drinking French, Italian and Australian wines, and replace them with more Californian chardonnay and zinfandel, that would help rebalance the NZ-US ledger without adversely impacting domestic wine sales.

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Perhaps a canny wine dealer might even want to begin importing Charlottesville-based Trump Winery’s magnums of blanc de blanc bubbly, personally signed by Eric Trump and currently discounted from US$999.99 to $545.30.

Wine is New Zealand’s third-biggest export to the US, worth $743m last year, and at present NZ winegrowers pay less than 1 percent tariff when they sell to the States. Increasing that tariff to the baseline 10 percent that Trump has announced will hurt the industry, big-time.

Redressing the import/export imbalance might be a price worth paying. That, says NZ Winegrowers chief executive Philip Gregan, and solutions like shipping the wine in big bladders rather than bottles, so the value is less when it crossed the border – then getting it bottled and labelled Stateside.

Then of course, there’s the tobacco and vape fluid. Associate health minister Casey Costello isn’t commenting – but there’s certainly potential to lower tariffs here, on $1.65m of American imports.

That $1.65m is the value when the American tobacco and vape fluid crosses our border – but New Zealand then imposes another $276,000 import duties and $905,000 GST on it.

Tobacco is one American product on which we do charge genuinely high duties. Not to protect domestic tobacco-farmers (we no longer have any) but to discourage people from killing themselves by smoking.

(For what it’s worth, the value of actual cigarettes imported last year was $51. Whoever imported those couple of packs of ciggies then paid an additional $238.10 in import duties and $60.17 in GST, according to the Customs Service. If we were to accept Trump assertion that GST too is a trade barrier, then that’s an effective 584 percent tariff!)

The import values are tiny, but it’s the message it sends to the President that is important: that NZ will help him eliminate the trade imbalance, whatever it costs. Even if that cost is to New Zealanders’ health.

Tobacco companies Philip Morris, Imperial and British American aren’t commenting directly. The only one saying anything is BAT, whose overseas spokesperson replies: “Like many, we are considering the impact of US tariffs on our international operations. Our supply chain is well-networked to ensure we have the agility to respond quickly to any supply chain issues, border closures or tariff changes.”

But drinking more zinfandel and smoking more American cigarettes won’t, on their own, redress the trade imbalance. So we come back to the planes.

Air NZ’s interim results show it spending $400m to begin a three-year programme of buying new US-made Boeing 787s, and interior retro-fitting 14 existing 787 aircraft and six 777-300ER aircraft.

In addition, it’s had to ground planes while engineers overhaul the 787-Dreamliners’ 10-year-old Rolls-Royce Trent 1000 engines, and fix expensive problems with the Airbus’s US-made Pratt & Whitney geared turbofan engines. That’s meant leasing additional engines.

Presenting the interim results in February, Foran said: “Investment in modern, fuel-efficient aircraft is an important part of Air NZ’s fleet strategy. But with over $1b worth of our newest, most efficient aircraft grounded at times, it’s been a tough year so far.”

The airline had received $94m in compensation from the engine-makers, but this doesn’t come close to covering the costs of the lost revenue from the time the planes have been spending on the ground, let alone added capital costs.

Some New Zealanders have been driven away from Air NZ in recent years, by the sharp increase in its airfares compared to cheaper airlines like Jetstar, not to mention the impact on climate emissions.

But if New Zealand is going to keep Trump happy, the easiest way to do so will be, as John Ballingall says, to keep buying more planes.

The first opportunity will be when the Government published the Defence Capability Plan.