Manufacturing Matters- Tuesday Top-Up 88

Jump to-

News From The World of Manufacturing
Other News of Interest to Manufacturers
Fun Facts

News From The World of Manufacturing

•In a recent RNZ Morning Report interview Meridian Energy CEO Mike Roan, when asked whether he was aware of consumers’ frustrations about high power prices said this: “I do, that’s why we’ve been investing so heavily in new renewable generation to overcome the impact of high gas prices on electricity costs and actually moderate those price increases.”

Thus, repeating a widely propagated assumption that increasing the share of supplies from wind and solar will reduce electricity costs over time. Here is the data from four countries, all generating more than half of their electricity from hydro: Austria (~65%), New Zealand (~60%), Norway (~85%) and Switzerland (~60%):

Data is for the all-included average end-user household prices per kWh, based on the IEA Energy Price Database

The trendlines above are for household retail prices. It is unlikely that these trends will differ significantly when prices for industrial end users are considered.

As an interesting aside, when asked to comment on the fact that his company last year made a loss of $452m but still paid out $387m in dividends and increased its debt by $168m, Mr Roan commented that “many of the owners of our business are everyday kiwis through Kiwisaver funds and, you know, they do deserve a reasonable return …” An interesting concept. Dividends are usually defined as “a portion of a company’s profit paid out to its shareholders, usually as a reward for their investment. These payments—which act as a way to share financial success—are typically issued in cash, though they can sometimes be distributed as additional shares of stock.”

Other news of interest to manufacturers

Based on BEA/Census BOP series (1960–2025) plus the Federal Reserve Bank of St. Louis historical goods and services data (1946–1960).

n.b. the 1950s figures are not fully comparable with the post-1960 BEA data. The older definition of “services” embedded investment income (dividends, interest from US overseas assets) within the services account, while modern BEA BOP methodology counts this separately as ‘primary income’.

•Sometimes important developments occur right before our eyes without (most of) us noticing. In a speech addressing the Economic Club of New York on June 23^rd, 2026, US Secretary of the Treasury, Scott Bessent, characterised the current position of the US economy when it comes to trade as vulnerable, noting that: “America shaped the postwar order in a world in which our overriding task was to help allies rebuild their economies and defend against the specter of communism. We accepted asymmetries because they served a larger strategic purpose. We opened our market because it helped to create a more prosperous world. And we tolerated imbalances because American economic strength appeared unassailable. … We came to believe that access to the American market could be extended without condition—and therefore without consequence. We assumed that closer economic integration would result in a greater convergence of interests. That supply chains would function in every crisis. Low prices would compensate for lost capacity. And above all, that other countries would treat our firms as fairly as we had treated theirs. Of course, those assumptions failed to materialize. … In recent decades, we’ve watched strategic industries migrate abroad; critical supply chains concentrate in jurisdictions that do not share our interests; foreign subsidies, forced technology transfer, discriminatory taxation, and non-market practices distort competition; and American firms grow to global scale, only to become targets of policies designed to constrain or replace them.”

That analysis isn’t new, of course. It goes back at least as far as 1987, when Donald J Trump appeared on CNN’s Larry King Show on September 2^nd complaining that he “was tired … of watching other countries ripping off the United States. This is a great country. They laugh at us behind our backs because of our stupidity and the leaders we have.” He went on to berate at great length countries like Kuwait and Saudi Arabia, but Japan in particular, for benefiting from US military protection while at the same time running up huge trade surpluses with the USA.

To remedy the situation Mr Bessent then laid out what he called the current government’s “approach to economic statecraft” in Five Principles:

The first is that economic security begins with national capacity.

To explain what that means, Mr Bessent quoted the very first US secretary of the Treasury, Alexander Hamilton (1779 – 1785) who had said that every nation “ought to endeavor to possess within itself all the essentials of national supply.” He continued that “our strength, in other words, is derived from what we can build, for the nation that cannot produce what it needs is not truly secure. The nation that depends on its adversaries for critical inputs is not truly sovereign.”

What are these “essentials” today? “The capacity to build, invent, finance, and scale the industries that will define the next century, among them semiconductors, AI, quantum computing, advanced manufacturing, shipbuilding, critical minerals, and pharmaceuticals, to name only a few. More than sectors of the economy, these are the sources of national power. And America must lead in each of them. In today’s economy, supply chains are the domain in which that leadership is tested.”

The second principle is that America’s openness will be matched by reciprocity, which is the basis of durable cooperation.

“Countries cannot seek access to our market while denying fair access to theirs. They cannot invite American capital while imposing discriminatory taxes and investment obligations aimed at American companies. They cannot benefit from American security while adopting industrial policies that exclude American technology. They cannot ask American firms to invest, hire, and innovate, and then require those firms to localize intellectual property, transfer know-how, or satisfy indigenous innovation requirements designed to favor domestic champions. …

America welcomes its partners and we are stronger because of them. But our partnership now carries expectations. And, in some instances, non-negotiable obligations.”

The third principle is that America will write the rules of the next economy.
The fourth principle is that financial leadership is a central instrument of statecraft.

Both of these Principles deal with maintaining and securing the role of the US Dollar as global economy’s primary reserve currency in the face of challenges like the introduction of new payment systems and efforts – most prominently by the BRICS group – to bypass US financial institutions and the USD in trade. See also this recent story in The Economist.

The fifth and most important principle is that economic statecraft must serve the American people.

Here Mr Bessent expands on what that means by laying out the expectations countries wishing to trade with the USA should have:

“They should expect a nation committed to strong alliances and productive economic relationships. A nation that welcomes fair competition, rewards investment, and believes in open commerce.

But they should also expect a nation that is now more aware of its interests—and more prepared to protect them.

A nation that insists on reciprocity. That shields its firms from discriminatory treatment. Secures its critical supply chains. Enforces sanctions and combats illicit finance. A United States, in short, that will not allow economic policy to grow detached from national strategy.

Our adversaries, meanwhile, should expect resolve.

Attempts to weaponize supply chains, steal technology, evade sanctions, manipulate markets, or coerce our partners will not go unanswered. We will build resilience before crises occur. We will work with partners wherever possible. And we will act whenever necessary.”

As we mentioned, Mr. Bessent’s speech received little notice in news media in the US, and even less so abroad. And yet, what we are seeing here is that there is a structured policy approach behind what some have hitherto interpreted as erratic moves, like the imposition and removal of tariffs, by a President who doesn’t really appear to have a plan.

Why does that matter to New Zealand’s manufacturers?

It does matter at least to those that are exporting to the USA – quite a few, actually. In 2025, 29% of all manufactured goods exports (FOB; excluding re-exports and food & beverage products; 2-digit HS Codes 84 to 89) went to the USA.

Now, it is (hopefully) quite unlikely that New Zealand will make it on the target list of countries US governments consider to be the major culprits when it comes to “ripping us off”.

However, whether the Plan laid out by Mr. Bessent will ultimately succeed or fail to achieve its stated goal, the efforts to implement it may well cause ‘collateral damage’ to manufacturers in countries across the board. The US is determined to secure its critical supply chains in sectors mentioned above. It will make its own assessment on which critical supplies from abroad it will henceforth be able to live with, for example.

Fun Facts (some of them not so funny)

•We have repeatedly reported on skill shortages in land-based industries in many countries, including manufacturing. New Zealand’s manufacturers across all categories export a lot of what they make, and most of those exports are shipped by sea. Not so good news, then, is a recent report about a global and growing shortage of skilled seafarers as well: