The United States has imposed new tariffs that hit Caribbean economies hard, especially those dependent on trade with China. The measures would require the Department of Homeland Security to impose tariffs of up to $1.5 million on any Chinese-built ships entering U.S. ports. There’s a ludicrous 125% tariff on Chinese products. This decision comes amidst ongoing trade conflicts with China. It will likely lead to increased import costs for goods transshipped from China back to the Caribbean. The mood is certainly somber as the region continues to struggle under severe economic duress. This moment is among the hardest it has endured since winning independence several decades ago.
The White House has recently used tariffs as a tool to further such strategy. This includes a 10% tax on all exports to the U.S., regardless of the country, except for Canada, China and Mexico. Combined with the new duty structure, additional hurdles to importing from the Caribbean could be highly exacerbated. Most of these products are made in or with materials from China. Moreover, the Caribbean’s 15 member states already suffer from high labor costs compounded with small local market sizes. These same issues have devastatingly hobbled the region’s once unstoppable manufacturing industry.
In Guyana—another country where massive investment from Chinese state-linked companies has poured in recently—the tariffs present a double whammy challenge. The U.S. is still an important partner for Guyana, buying its biggest exports—crude oil, gold, and bauxite. Until now, Guyana was subjected to exorbitant export rates of up to 38%. Now, the U.S. has placed a temporary 90-day pause on these increased tariffs.
A new bridge connecting Georgetown to the western half of Demerara-Mahaica is already under construction. This major infrastructure project is making the complicated trade landscape even more so. A Beijing-based company is constructing this ambitious project. It demonstrates Guyana and China’s deep economic connections.
Now, Caribbean leaders are calling on their governments to step in and soften the blow of these tariffs by reducing import duties. Import duties in the region are based on a percentage of cost of items. Sadly, with increasing costs imposed by U.S. tariffs, this will only add to the squeeze on domestic buyers.
Mia Mottley, Prime Minister of Barbados, focused on the impact of this trade war on ordinary people.
“We are working and will continue to work to become more self-sufficient, but… this trade war will mean higher prices for all of us.” – Mia Mottley
She has been encouraging the Caribbean to work on diversifying their trading partners. While the U.S. market has been strong, relying only on it is not a sustainable strategy.
“We must build our ties with Africa, Central and Latin America, and renew those ties with some of our older partners around the world, in the United Kingdom and Europe, and in Canada. We must not rely solely on one or two markets.” – Mia Mottley
Francis Bailey, an economist, pointed out the bottom line. He said Caribbean nations have been made very vulnerable by their historic dependence on the U.S. market.
“The problem we have created for ourselves is that we have been dependent on the U.S. market for such a long time and have not sought to diversify into other markets.” – Francis Bailey
This latter dependency further complicates Caribbean countries ability to pivot and adapt to new global economic realities. Many of them are still actively scrambling to find other markets for their exports.
Business owners across the region are worried about the effects of these tariffs. Local entrepreneur and business owner Carissa Warner discussed her concerns with increasing costs impacting her business and personal lives.
“Some of my projects are on hold while we wait to see what happens,” – Carissa Warner
Warner went on to express her concern about rising food costs, which may increase due to higher import expenses.
“I’m so worried about the cost of food I have been looking online for pots to start growing fresh produce. I don’t think people realise the impact it will have on us.” – Carissa Warner
As widely noted by Sir Ronald Sanders, excellent and long-time Caribbean diplomat, these tariffs had economic ramifications. He noted that while any loss is detrimental to small economies, the 10% tariff may not significantly disrupt access to U.S. markets.
“Any loss is not a good thing for our small economies, but the 10% that we face is not going to disrupt our goods from going to the US market.” – Sir Ronald Sanders
The U.S. has a trade surplus with nearly all the Caribbean nations. The latest twist on these harmful new tariff measures made even tougher by this reality. As signatories to the Paris Agreement, Caribbean governments must now assess their immediate next steps. They must proactively identify their past trading habits and actively seek new solutions to build robust and diversified economies.