Trump tariffs could ‘push debt to 112 per cent’ – Central Bank Governor

Barbados faces potential economic damage from escalating US trade tensions, with economic output possibly falling by more than two per cent and public debt rising to 112 per cent of gross domestic product if global trade conflicts intensify, according to research by Central Bank Governor Dr Kevin Greenidge.

In the 13-page research paper titled The Impact of the 2025 US Global Tariff Hikes on Barbados, Dr Greenidge warned that Barbados’ heavy dependence on the US for trade, tourism, and transhipment exposes it to serious downside risks from the recently announced tariff regime by Donald Trump.

“If US outbound tourism is adversely affected by these tariff hikes, Barbados stands to lose between 1.04 and 2.07 per cent of GDP,” the governor stated.

“In a worst-case scenario that combines tourism and export disruptions, GDP could fall by as much as 2.33 per cent.”

The analysis, released quietly alongside the Bank’s Q1 2025 economic report, expands significantly on the downside risks flagged in that document.

The official review projected 2.7 per cent growth for 2025 and noted strong foreign reserves and fiscal performance. But the tariff impact paper paints a more sobering picture of the devastation that could happen if external shocks intensify.

Greenidge cautioned that even modest trade friction could undermine years of fiscal consolidation, warning: “Public debt, which currently stands around 103 per cent of GDP, could edge upwards to 112 per cent under compounded tariff and shipping cost stress.”

Inflation could also rise sharply, especially if tariff-induced price increases coincide with continued freight bottlenecks in key global shipping lanes like the Panama Canal and the Red Sea.

“Barbados could face inflation of up to 4.5 per cent in this scenario, with major impacts on food and fuel imports,” the paper stated.

To mitigate the risks, the governor is calling for swift and coordinated action, both nationally and within Caricom.

His recommendations include the creation of a “Tariff Watchlist” to track potential shocks, acceleration of food and energy security investments, and regional agreements to protect intra-Caricom trade flows.

“In the absence of collective regional responses and domestic resilience-building, small open economies like Barbados will bear disproportionate costs,” he said.

The paper also estimates that the government could be forced to spend an additional £85m to £100m in subsidies to cushion the blow to vulnerable households if food and fuel prices spike under sustained trade conflict.

While no major fallout has yet been observed in tourist bookings or commodity supply lines, Greenidge stressed that “preparation, not reaction” must be the guiding principle.

“We are not forecasting disaster,” he wrote. “But risk exposure has increased, and resilience must be actively strengthened before conditions deteriorate.”

The publication comes at a time when the government is preparing to transition to BERT 3.0—the next phase of the Barbados Economic Recovery and Transformation programme—and as global markets begin to react to a new wave of tariff-driven trade policy.
(SM)