US Tariffs and the Caribbean Economy

St. Vincent and the Grenadines Finance Minister, Camillo Gonsalves

Introduction to the Issue

WASHINGTON, CMC – St. Vincent and the Grenadines Minister of Finance, Camillo Gonsalves, says the government is looking to broaden its tourism base to reduce the impact of the tariffs announced recently by the United States President, Donald Trump.

Trump has announced far-reaching new tariffs on nearly all US trading partners, including a 125 percent tax on imports from China and a 20 percent tax on the European Union, among others. Economists and other traders say the move is designed to dismantle much of the global economy’s architecture and trigger broader trade wars.

In the Caribbean, including St. Vincent and the Grenadines, Trump announced a 10 percent tariff, while in Guyana, the tariff is as high as 38 percent.

Impact on the Caribbean Region

However, Timothy Antoine, Governor of the Eastern Caribbean Central Bank, said that the impact of the levy on US tourist arrivals in the Caribbean is expected to be felt later this year and into 2026.

Gonsalves and Antoine attended a meeting between the finance ministers and central bank governors from the Caribbean Community (CARICOM) and the International Monetary Fund (IMF) during the Spring Meetings, which wraps up here later on Friday.

Gonsalves told the media that the discussion was “beneficial discussion, as usual,” particularly regarding the IMF’s revised economic forecast in its World Economic Outlook and the policy shifts in the United States.

Global Recession and US Inflation

He noted that the IMF’s World Economic Outlook, released on Tuesday, has increased the likelihood of a global recession from about 25 to about 40 percent.

“There’s still a lot of variables. We don’t know where the US administration will ultimately fall, whether they pause, whether they revise, whether they have additional trade deals, so we’re very much in flux.”

He said St. Vincent and the Grenadines and other tourist-independent countries in the Caribbean are heavily reliant on US tourism, adding that there is a strong correlation between recessions in the US and negative impacts in the region.

Gonsalves said that one percent inflation in the United States has a direct impact of 0.5 percent on his country’s tourism sector.

Diversification and Regional Integration

“And so we’re very, very concerned about it. What we’re trying to do is expand our tourism base, try to get tourists from outside of the US region, and diversify. Fifty percent of our tourists currently come from the US. We’re trying to make that less heavily dependent,” Gonsalves said.

“And of course, we’re trying to grow our economy through other fields as well, to make our economy more resilient to the ultimate declines, though, as a cyclical movement, in tourism activity.”

Gonsalves noted that revised economic forecasts are predicted to impact the Caribbean region.

“So we discussed their analysis of the impact and what we believe, as the Caribbean constituency, the fund can do to improve their relationship with the Caribbean region, to support us in light of what will likely be negative impacts, and to chart a way forward,” the Finance Minister said.

Logistical Arrangements and Trade

He noted that many Caribbean countries are “not massive exporters to the United States.

“Our economies are increasingly evolving towards services. However, the United States remains the dominant point of contact for our imports, not only of American goods but goods from Latin America and goods from Europe; goods from further afield.”

Gonsalves said that the Mexican fruits and vegetables consumed in the Caribbean come through Miami, as is the case with Brazilian or Argentinian beef and European products.

“And if a tariff is slapped on all of those products before they are on-shipped to the Caribbean, it will have an inflationary impact. It will hurt growth.”

Conclusion

He said the Caribbean must accelerate regional integration, improve trade between and among its islands, and revise the logistical arrangements for goods entering the region.

“Miami has been a convenient port of contact, but maybe it’s time for us to look at the improved port facilities in Jamaica, in Trinidad and Tobago, and outside of CARICOM in the Dominican Republic, where maybe we can start to bring some of those goods into our region without them receiving the US tariff. These are important things that we have to analyze urgently.”

Antoine made a similar call to the media for the Caribbean to relook at Miami as its shipping hub, and Gonsalves said that individual countries are meeting with US trade officials.

“St Vincent and the Grenadines has a meeting. I just spoke to other countries in the room, and meetings were scheduled with various US trade officials, so we are making repeated demarches,” he said.

He said the Organisation of Eastern Caribbean States (OECS) will have a separate group encounter with US foreign affairs and trade officials in the coming weeks.

“And we’re going to make our case, but we are cognizant of the headwinds we’re facing in this regard,” Gonsalves added.

FAQs

What are the tariffs announced by the US President?

The US President, Donald Trump, has announced far-reaching new tariffs on nearly all US trading partners, including a 125 percent tax on imports from China and a 20 percent tax on the European Union, among others.

How will the tariffs affect the Caribbean region?

The tariffs are expected to have a negative impact on the Caribbean region, particularly on tourism-dependent countries. The region is heavily reliant on US tourism, and a recession in the US could lead to a decline in tourist arrivals.

What is the Caribbean doing to mitigate the impact of the tariffs?

The Caribbean is trying to diversify its economy, expand its tourism base, and improve trade between and among its islands. The region is also revising its logistical arrangements for goods entering the region to reduce its reliance on the US.