The Prime Minister is hitting the phones with world leaders about the new trading environment as the United States retaliates against China by hiking tariffs to 125 percent.
US President Donald Trump announced on Thursday (NZT) he would be putting a 90-day pause on retaliatory tariffs for other countries, but the stock markets remain volatile as the two superpowers continue to battle it out.
Speaking to media at Parliament Luxon said his phone calls would be concentrated on leaders from the Indo-Pacific region and Europe and were scheduled through to 9pm on Thursday night.
Luxon has posed the idea of the European Commission working more closely with the leaders of the dozen countries signed up to the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) to champion the rules-based trade order and provide some stability and certainty.
He told reporters with 27 countries in the European Union and 15 percent of world trade "tied up in the CPTPP there's a real opportunity to coordinate and work together and I'll be having some of those conversations later today as well".
It would take some time to sign all those European countries up to CPTPP so it might not go as far as having them formally join, but Luxon said he would have that conversation with leaders "and it will be ultimately a decision for the EU, and it does involve a ratification process that is quite slow".
On Thursday morning New Zealanders woke up to a 90-day suspension on reciprocal tariffs over and above the 10 percent baseline, that New Zealand has had imposed.
"What we really need is real certainty and part of the problem is the instability and uncertainty."
"One in four of our jobs are tied to trade," Luxon said.
The phone calls with his counterparts are designed to gather information and "understand how each of the leaders and their political leadership is interpreting events of the last few days".
"I want to make the case to like-minded countries around the importance of sticking together and continuing to advance the case of free trade around the world where we can, and if there's things we can accelerate let's look at doing that as well," he said.
Since the trade tariffs announcement Luxon said New Zealand officials have been engaged with the US making the case for New Zealand not to be impacted.
Earlier on Thursday, Luxon spoke to a business audience of more than 200 hosted by the Wellington Chamber of Commerce, where he sought to assure chief executives and leaders about what may lie ahead for New Zealand in what is now a tit-for-tat trade war between China and the United States.
"The events of recent days are the most significant challenge to the rules-based trading system since the General Agreement on Tariffs and Trade (GATT) was formed in 1947," Luxon said.
"Action, reaction, and response have shocked financial markets.
"As the Minister of Finance highlighted earlier this week, the direct impact on the New Zealand economy from the US tariffs announced last week is likely to be around $900 million or roughly 0.2 percent of GDP."
"But the second order consequences of a region and a world retreating from trade and increasingly uncertain about its economic future will be more significant, despite the welcome news of de-escalation this morning," he said.
"I know for many businesses keeping an eye offshore and for those New Zealanders watching their KiwiSaver accounts, that could be confronting."
Luxon said he wasn't ready to "throw in the towel" just yet and declare an end to the era of free markets and a rules-based international order.
That meant working with like-minded trading nations to keep making the case for both.
The strength of the CPTPP, which includes a dozen countries from New Zealand and Australia, through much of Asia, and to the United Kingdom, would now look to also work with the European Union to "champion rules-based trade".
"Collective action, and a collective commitment, by a large portion of the global economy would be a significant step towards preserving free trade flows and protecting supply chains," he said.
Clearly that won't be enough on its own, and Luxon said that was why he was joining a call with other world leaders today to compare notes on world trade and "test what we can do together to buttress the rules-based trading system".
"And it's why I will be heading to the United Kingdom later this month to meet Prime Minister Sir Keir Starmer, to talk trade, security, and the geopolitical backdrop in Europe and the Indo-Pacific.
"We can't make the case for New Zealand sitting at home," he said.
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