Trump’s Tariffs

By the time this article is published, the Barbados Government would have presented the Financial Statement and Budgetary Proposals for 2025/2026. The wish of all in the business community is that a suite of policy and fiscal considerations are introduced not only to stimulate growth within the local economy but equally, to address any potential negative impact of the new trade policies of the Trump Administration.

From his first term in 2017, President Trump demonstrated a keen recognition of the role trade policy played in ensuring a thriving middle class. He transformed the trade policy landscape, focusing on prioritising the national interest. He established a new consensus that tariffs are a valid instrument of public policy, advocated for tough trade enforcement, and showed that the US can use its leverage to open markets for American exports, especially in agriculture. Through these efforts, President Trump proved that a strong, realistic trade policy can create jobs, foster innovation, bolster national defense, raise wages, support farmers, and bring back manufacturing to the US.

American First Trade Policy

At the start of his second term this year, Trump signed the Presidential Memorandum “America First Trade Policy,” in January. As reported by ustr.gov this outlined a plan for transformative change to address America’s economic demise. The memorandum directs the US Trade Representative (USTR) and other agencies to take swift, unprecedented action to put America’s interests first in trade.

The memorandum tackles the trade deficit by commanding USTR and other agencies to “investigate the causes of the country’s large and persistent annual trade deficits in goods, as well as the economic and national security implications and risks resulting from such deficits”.

Additionally, the memorandum directs USTR to review trade relations with all nations, identifying unfair practices including non-reciprocal trade, with the goal of using its leverage to open new markets and bring manufacturing back home.

USTR will also review existing trade agreements to ensure they support the national interest. This includes the US-Mexico-Canada Agreement (USMCA), which will undergo a review to assess its impact on American workers, farmers, and businesses ahead of the mandated 2026 review. The memorandum also addresses the US-China trade relationship, which has been a key driver of the trade deficit. Despite the Phase One Agreement negotiated in Trump’s first term, China has not fully complied.

A recent article by Caribbean Trade Law argued that while these tariffs will hurt the affected countries—particularly manufacturers and workers—Trade 101 teaches that tariffs often have a bigger impact on the country enacting them. Trade between the USMCA countries is worth billions annually, with supply chains deeply integrated, specifically in sectors like automotive, agriculture, and textiles.

Many goods on American shelves are either sourced from these countries or contain inputs from them. As a result, US manufacturers will face increased costs for raw materials and intermediate goods from these nations, which they are expected to pass on to consumers. Many project that the outcome will be increased prices for everyday items.

Impact on Caribbean Consumers

Caribbean manufacturers that rely on US inputs are likely to experience rising prices and increased operational costs, which could ultimately lead to higher prices for end consumers. This could affect the cost of American-made goods, such as food, electronics, and vehicles. The Caribbean could potentially face higher costs and disruptions in supply chains.

However, Caribbean manufacturers can explore strategies to minimise the impact. One possibility is to look for alternative suppliers, to help mitigate some of the price hikes. This situation also presents an opportunity for more Caribbean sourcing – instead of importing so much fresh fruit from Florida, the Caribbean could increase regional sourcing.

The tariffs, which include 25 per cent on certain imports and 10 per cent on others, were set to take effect in February, however, have been delayed by one month.

Trinidad’s Newsday reported that Business leaders and economists are concerned about the tariffs’ long-term effects. The CEO of the American Chamber of Commerce in Trinidad and Tobago, Nirad Tewarie, issued a warning stating that increased tariffs would most likely lead to inflation, making everyday goods more costly for Caribbean consumers. Vivek Charran, President of the Confederation of Regional Business Chambers, pointed out that the rising cost of imported products, particularly from Mexico, may have a significant impact on prices across the region as many food products in T&T are sourced from Mexico and processed in the US. Tariffs could therefore drive up costs for local importers.

Economist Terrence Farrell pointed out that tariffs imposed in retaliation are unlikely to benefit anyone, with the most significant damage potentially falling on the US due to its reliance on imports. Trump’s strategy primarily targets curbing illegal immigration and the flow of drugs across US borders. By leveraging tariffs, he seeks to pressure trade partners to meet US demands. However, this approach is not without its risks as both Canada and Mexico are crucial to US trade. Tariff impositions could drive up prices for American consumers.

The long-term effects of these tariffs remain unclear for the Caribbean region. Tewarie pointed out that businesses might seek alternative suppliers to manage costs, which could potentially lead to import substitution if higher prices for foreign goods persist. While such shifts could offer some opportunities, the impact of tariffs may be unavoidable, especially for economies that depend on imports from the US and other trade partners.

Earlier calls have been made in this column for a more united front by CARICOM leaders to make the integration project work for Caribbean people and businesses. Maybe Trump 2.0 is just the catalyst needed to determine once and for all if there is any future for regional integration.

The Small Business Association of Barbados (www.sba.bb) is the non-profit representative body for micro, small and medium enterprises (MSMEs).