Caribbean rum grapples with new Trump tariffs

The Caribbean rum industry is bracing for economic turbulence after the United States imposed a 10 per cent tariff on imports from Barbados and other CARICOM nations, an industry leader has told Barbados TODAY.

The move is said to threaten the profitability of the region’s premium rum producers and is straining longstanding trade arrangements.

Chief executive officer of the West Indies Rum and Spirits Association (WIRSPA), Vaughn Renwick, described the development as “bad news all around”, warning that the region’s small, premium-focused producers now face a fresh wave of economic pressure.

Renwick explained that Caribbean rum, including Barbados’ globally celebrated brands, traditionally entered the US market duty-free under trade arrangements such as the Caribbean Basin Initiative (CBI). However, he noted that even with duty-free access, producers already contended with substantial federal and state-level excise taxes upon entry into the American market.

“Normally, rum from Barbados and the rest of the Caribbean entering the US goes in dutyfree, but once you get into the US, you have alot of taxes that you get hit with—you’ve got excise taxes at the federal level and at the state level… so there’s already a lot of taxation on spirits,” he explained. “So taxation is already high, and adding a 10 per cent at the border just puts more pressure on producers to see where they can cut costs because you can’t just go into the market and raise prices like that. Your distributor is going to be putting pressure on you not to increase prices [and] for you to absorb that cost yourself.

“So I imagine all over the world, producers of whatever goods are being pressured by importers and distributors to try and hold prices where they are,” Renwick added.

He noted that regional leaders are already discussing their response, with CARICOM leaders engaged in conversations on how best to address the tariff hike.

“In terms of government-to-government action, we understand that CARICOM heads have already started discussing reactions to this tariff imposition,” he said. “Of course, it’s not just the 10 per cent on Barbados and CARICOM countries—you have a 38 per cent on Guyana, which is tremendous. One of the highest reciprocal taxes that they have put in place.

“I think one of the things CARICOM governments are going to be saying to the US is: ‘Okay, we understand you have this process; you want to put on these reciprocal tariffs, but we have a historical relationship and an existing free trade arrangement—which is the CBI—’, so I think they’re going to be arguing for the US to reinstate CBI duty-free treatments.”

Historically, rum and other spirits have been major export products for Barbados and other Caribbean countries.

In the short term, Renwick said Caribbean rum producers will have to focus heavily on what can be adjusted. He said: “They’re looking to see whether they have products on the way, having conversations with distributors, and of course, in the medium term, they’re going to be looking at their supply chains—the things that they need to buy: bottles, labels, and so on—to see where they could possibly reduce costs to continue to be competitive.”

But adaptation only goes so far, he warned.

“Our producers in the Caribbean are indigenous brands, and some of these indigenous brands have international ownership—for instance, Mount Gay is owned by Rémy Cointreau. Whilst you have big global brands that buy their product from all over the place and they have very sophisticated supply chains—they can play with their supply chains to cut costs and export to the US and maintain prices,” he noted.

“We here in the Caribbean—we’re selling premium products that are based on Barbados origin, based on Jamaica origin, based on Guyana origin—we can’t just all of a sudden switch where we’re buying alcohol from…. You can’t just play with your supply chain like big global brands can. So even though everybody has the same 10 per cent, we are at a disadvantage because we’re small companies; we’re vulnerable to these changes.”

Andrew Hassell, managing director of Barbados-based West Indies Rum Distillery (WIRD), makers of Plantaray rums, said that while the new taxes will undoubtedly affect business, discussions are underway with distributors to determine the best course of action.

He said: “For us, obviously it will have an effect, but we are looking at it and talking to our customers to see if any adjustments [can be made]. So for us, it’s early days yet. That’s really where we are. There was a lot about tariffs, but now the tariffs have happened, we are talking to our customers to try and see the implications. That’s where we are.” shamarblunt@barbadostoday.bb