The domino effect: How US tariffs reshape CARICOM economies and geopolitics

On February 1, 2025, President Donald Trump unveiled sweeping tariffs poised to reshape global trade dynamics, targeting imports from Canada, Mexico, and China. Initially set to take effect on February 4, 2025, the policy imposed a 25% tariff on most Canadian goods—though reduced to 10% for energy resources—a 25% levy on all Mexican imports, and a 10% duty on Chinese goods.

However, in a recent development, the US and Mexico agreed to a 30-day pause on tariffs in exchange for Mexico deploying 10,000 troops to curb drug trafficking at the US border. Canada remains in tense negotiations for similar relief, but as of now, the tariffs on Canadian imports have also been temporarily suspended.

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Importantly, these tariffs have not been eliminated entirely, meaning the economic scenarios outlined in this article remain relevant, just delayed for the moment. If negotiations fail or the pause expires without a resolution, CARICOM economies will still face the anticipated ripple effects.

The executive orders also suspend the Section 321 de minimis process, subjecting even small-value shipments (under US$800) to tariffs—a move with outsized implications for economies reliant on frequent, low-volume trade. The Atlantic Council warns that these tariffs, if reinstated, risk inflating consumer costs, disrupting supply chains, and triggering retaliatory measures—a perfect storm of uncertainty for global markets.

Amid this upheaval, the Caribbean Community (CARICOM)—a bloc of 15 small, import-dependent mostly island nations—faces a silent crisis. Already reeling from earlier Trump-era tariffs on Chinese steel (25%) and aluminium (10%), CARICOM imports over 60% of its food and 40% of machinery from the US, leaving it uniquely exposed to ripple effects from America’s trade wars.

If the 2025 tariffs eventually take full effect, they threaten to compound existing vulnerabilities: US suppliers, grappling with higher costs for Canadian energy or Mexican components, may pass expenses onto Caribbean importers. Meanwhile, the suspension of de minimis exemptions could strain small businesses reliant on affordable, frequent shipments of medical supplies or electronics.

This article examines how CARICOM’s fragile economies are caught in the crossfire of escalating US protectionism. From inflationary shocks in Haiti’s rice markets to Mexico’s troop deployment reshaping regional security dynamics, we explore the tariffs’ cascading impacts on social inequalities, supply chains, and geopolitical alliances.

Yet amid the turmoil, CARICOM nations are forging pathways to resilience—accelerating regional integration, diversifying energy sources, and navigating a precarious tightrope between Washington’s demands and Beijing’s Belt and Road allure. As global trade fractures, the Caribbean’s struggle for stability offers urgent lessons in adaptation, solidarity, and survival.

US tariffs impact on CARICOM economies

1. Rising import costs: Inflation and social unrest

CARICOM nations, comprising small island states and coastal economies, face inherent challenges due to their limited arable land and underdeveloped industrial sectors. This dependency on imports is rooted in historical legacies of colonial economies that prioritised cash crops like sugar, cocoa and bananas over diversified agriculture, leaving many nations reliant on foreign goods.

For instance, the United States serves as a critical supplier, providing 70% of Jamaica’s wheat—a staple for its population—and 50% of Trinidad and Tobago’s medical equipment, essential for healthcare infrastructure. This reliance is further entrenched by trade frameworks like the Caribbean Basin Initiative (CBI), which, while fostering US-Caribbean trade, has also reinforced dependency on American markets.

The Trump administration’s tariffs on Chinese goods, such as steel and electronics, have indirect yet profound ripple effects. US suppliers, grappling with increased production costs from these tariffs, pass expenses onto Caribbean importers.

Compounding this, the US dollar’s appreciation against local currencies—such as the Jamaican dollar and Haitian gourde—makes imports even costlier. For example, Haiti, which imports 80% of its rice from the US, saw prices soar by 30% in 2023. In a nation where 60% survive on less than US$2 a day, this spike reignited protests in Port-au-Prince, mirroring the 2008 food riots. The unrest forced the government to implement emergency subsidies, though these measures strained an already fragile fiscal budget.

To mitigate these pressures, CARICOM nations are exploring alternative suppliers. Guyana, for instance, now sources 25% of its construction materials from China, leveraging cheaper costs to fuel its oil-driven infrastructure boom. However, this shift introduces logistical hurdles; delayed shipments from China have postponed critical projects like the Linden-Mabura Highway, underscoring the trade-offs between cost and reliability.

Meanwhile, Barbados’ “30 by 30” initiative aims to bolster food security by sourcing 30% of food locally by 2030. The programme includes grants for agro-tech startups and tax incentives for farmers adopting climate-resilient practices. Yet, intra-CARICOM trade remains stagnant at 15%, hampered by fragmented transportation networks and bureaucratic barriers, such as inconsistent sanitary regulations that block cross-border agricultural trade.

The World Bank warns that a 10% rise in import costs could push regional poverty rates up by 3–5%. This alarming projection is already manifesting in countries like Saint Lucia, where inflation hit 12% in 2023, disproportionately affecting low-income households.

Governments have responded with mixed strategies: Trinidad and Tobago imposed price caps on 50 staple foods, but retailers warn of impending shortages, while Jamaica introduced conditional cash transfers to offset rising living costs—a model praised by the IMF but limited by fiscal constraints.

Regional organisations like CARICOM are advocating for cohesive solutions, such as harmonising trade policies and investing in regional shipping networks to reduce logistical bottlenecks. However, progress is slow, highlighting the tension between national sovereignty and collective action.

As Prime Minister Mia Mottley of Barbados emphasises, “Our survival hinges on breaking colonial trade chains and fostering self-reliance.” Yet, achieving this requires navigating a labyrinth of historical dependencies, global market forces, and urgent socio-economic needs—a challenge that continues to define CARICOM’s path forward.

2. FDI and tourism: Collateral damage of trade wars

The Caribbean Community (CARICOM) economies, already navigating the choppy waters of global trade dynamics, face compounded challenges in foreign direct investment (FDI) and tourism—sectors vital to their economic survival. Tourism, contributing between 15% and 50% of GDP across CARICOM nations, is particularly vulnerable to macroeconomic shifts stemming from US trade policies.

The appreciation of the US dollar by 8% in 2023 has rendered Caribbean vacations more expensive for American tourists, who constitute the majority of visitors to islands like The Bahamas, Jamaica, and Antigua. For instance, The Bahamas, where 80% of tourists are US nationals, reported a 12% decline in bookings in the latter half of 2023, a trend mirrored in Jamaica’s resort-heavy regions.

This downturn echoes the aftermath of the 2008 financial crisis, when Caribbean tourism revenues plummeted by nearly 20%, underscoring the sector’s sensitivity to US economic health. Experts from the Caribbean Tourism Organization warn that a potential US recession—spurred by inflationary pressures from tariffs—could slash regional tourism revenue by up to $2.5 billion annually, jeopardising jobs for over 2 million workers reliant on the industry.

Compounding these pressures are remittances, a lifeline for many CARICOM households. In Jamaica, remittances account for 20% of GDP, funnelling 3.5 billion annually into the economy, while in Haiti, they represent 303.5 billion annually into the economy, disproportionately impacting rural communities where remittances fund education, healthcare, and small businesses. In Haiti, where 60% of households depend on these inflows, even a modest decline could deepen food insecurity and social unrest.

Simultaneously, CARICOM’s fledgling manufacturing sector struggles to gain traction. Haiti’s textile industry, which supplies 5% of US apparel imports under trade preferences like the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act, faces existential threats from Mexican competitors.

US tariffs on Chinese goods have prompted firms to relocate production to Mexico, leveraging its proximity to the US and competitive labor costs. Mexican apparel exports to the US surged by 14% in 2023, eroding Haiti’s market share. Without modernisation of infrastructure or expansion of trade agreements like the Caribbean Basin Trade Partnership Act (CBTPA), Caribbean manufacturers struggle to compete. The Dominican Republic’s textile sector, for example, has seen FDI drop by 18% as investors pivot to Mexico, drawn by its robust supply chains and tariff exemptions under the USMCA.

These challenges highlight the broader impediments to economic diversification in CARICOM nations. Reliance on tourism and remittances— sectors inherently tied to external economic conditions—leaves the region exposed to global shocks.

The decline in FDI, which fell by 9% region wide in 2023, further stifles efforts to build resilient industries, from renewable energy to agro-processing. While initiatives like Jamaica’s Special Economic Zones aim to attract tech and manufacturing investments, bureaucratic hurdles and inadequate infrastructure slow progress. Regional collaboration, such as the CARICOM Single Market and Economy (CSME), offers potential solutions by harmonising trade policies and pooling resources, but implementation lags due to disparate national priorities.

In response, policymakers are advocating for targeted strategies: renegotiating trade agreements to secure preferential terms for Caribbean exports, investing in digital infrastructure to enable remote work opportunities, and diversifying tourism markets by targeting European and Canadian travellers.

The Caribbean Development Bank has proposed a $500 million fund to bolster climate-resilient tourism infrastructure, while Barbados’s “Digital Nomad Visa” programme aims to offset traditional tourism losses. Yet, these measures require sustained political will and international support—elements often in short supply.

As economist Dr Damien King notes, “CARICOM’s survival hinges on its ability to pivot from survival tactics to strategic reinvention, leveraging its human capital and geographic assets in a post-tariff world.” The path forward demands not only navigating immediate trade war fallout but also reimagining the region’s role in a rapidly shifting global economy.

3. Geopolitical chess: China’s Caribbean gambit

The Caribbean has emerged as a strategic battleground in the global tug-of-war between China and the United States, with CARICOM nations caught in a complex web of economic incentives and geopolitical pressures. As US tariffs restrict China’s access to American markets, Beijing has intensified its outreach to the Caribbean through the Belt and Road Initiative (BRI), a cornerstone of its global infrastructure and influence strategy.

Since 2018, China has extended over US$6 billion in loans and grants to CARICOM countries, financing high−profile projects such as the US$730 million Jamaica Logistics Hub—a mega port designed to position the island as a transshipment gateway—and Suriname’s East-West Corridor Highway, a 150-kilometre artery critical for connecting remote mining and agricultural regions to coastal markets. These investments mirror China’s playbook in other regions, blending infrastructure development with soft power diplomacy to expand its geopolitical footprint.

Debt-trap diplomacy or development opportunity?

While these projects promise modernisation, concerns about debt sustainability loom large. China’s loans often come with strings attached: high interest rates (averaging 4–6%, compared to 1–2% from multilateral institutions), collateralised against strategic assets, and tied to Chinese contractors and labour. This model evokes Sri Lanka’s 2017 Hambantota Port crisis, where Colombo ceded control of the port to China after defaulting on debt.

In the Caribbean, Grenada—burdened by a 70% debt-to-GDP ratio, partly due to post-hurricane reconstruction loans—faces similar risks. In 2021, China restructured Grenada’s debt but secured preferential access to its exclusive economic zone for fishing rights, sparking debates over sovereignty. Guyana, however, presents a counter-narrative.

Bolstered by its newfound oil wealth (ExxonMobil projects 1.2 million barrels per day by 2027), Guyana has negotiated BRI agreements with stringent safeguards, including clauses requiring arbitration in neutral courts and mandating local hiring quotas. “We’re leveraging oil to avoid dependency,” explains Guyana’s Vice President Bharrat Jagdeo, reflecting a cautious approach absent in smaller, cash-strapped CARICOM states.

US countermeasures: Aid cuts and trade carrots

The United States, long dominant in the Caribbean under the Monroe Doctrine, has responded to China’s inroads with a mix of coercion and incentives. In 2023, the US threatened to slash US$42 million in annual anti−narcotics aid to Jamaica—acritical lifeline for its Coast Guard and drug interdiction programmes—unless Kingston curtailed Huawei’s role in its 5G network rollout.

Simultaneously, the Biden administration expanded the Caribbean Basin Initiative (CBI), offering tariff exemptions on electronics and pharmaceuticals to CARICOM exporters, a move projected to boost regional exports by US$300 million annually. For instance, Trinidad and Tobago’s pharmaceutical sector, which supplies 15% of US generic drug imports, stands to gain US$50 million in new revenue under the CBI expansion. Yet critics argue these measures are reactive. “The US offers band aids, while China builds bridges—literally,” notes Dr Cynthia Barrow-Giles, a political scientist at the University of the West Indies.

CARICOM’s delicate balancing act

CARICOM nations are navigating this high-stakes rivalry with pragmatism. Jamaica, while hosting Chinese-funded infrastructure, remains the US’s third-largest trading partner in the Caribbean, exporting US$1.2 billion in goods annually. Barbados, meanwhile, has adopted a “non−aligned” stance, accepting BRI funds for a US$1.2 billion in goods annually and a US$100 million solar farm while partnering with US firm Seaboard Energy on a sustainable aviation fuel plant.

However, smaller economies like Dominica and Saint Lucia, lacking resource leverage, face tougher choices. Dominica’s 2022 decision to switch diplomatic recognition from Taiwan to China—a move rewarded with a US$120 million hospital—highlighted the transactional nature of these alliances.

Regional and global implications

The Caribbean’s geopolitical realignment carries broader ramifications. China’s growing presence challenges US hegemony in America’s “third border”, with implications for security and trade routes. Meanwhile, the EU has quietly increased its engagement, offering €150 million in climate resilience grants to counterbalance Chinese loans.

For CARICOM, the challenge lies in maximising development gains while avoiding overreliance on any single power. As Dr Richard Bernal, former Jamaican ambassador to the US, cautions, “We must be bridge-builders, not pawns. Our small size demands agile, principled multilateralism.” The region’s ability to leverage its strategic location and diaspora ties—while addressing internal disparities in wealth and governance—will determine whether it emerges as a master or casualty of this new Great Game.

4. Policy crossroads: CARICOM’s survival strategies

CARICOM nations, grappling with the dual pressures of global trade volatility and climate vulnerability, are navigating a precarious policy landscape. Their survival strategies span short-term crisis management and long-term structural reforms, reflecting both urgency and ambition in equal measure.

Short-term fixes: Tariff exemptions and price controls

In the immediate wake of US tariff hikes, CARICOM governments have prioritised tactical interventions to shield consumers and critical industries. Barbados, for instance, successfully lobbied the US in 2023 for exemptions on solar panels under the Caribbean Basin Initiative (CBI), a move that slashed import costs by 25% for renewable energy projects.

This exemption was secured through diplomatic channels, leveraging Barbados’ historical trade ties and its vocal advocacy for climate action on global platforms like the UN Climate Summit. The relief has accelerated the country’s transition to solar energy, with installations rising by 40% in 2024, though critics note that such exemptions remain piecemeal and politically contingent.

Meanwhile, Trinidad and Tobago introduced price controls on 50 staple foods, including rice, flour, and cooking oil, to curb inflation that had surged to 9% by late 2023. While this stabilised prices for low-income households—60% of which spend over half their income on food—the policy strained retailers.

Supermarket margins shrank by 15%, forcing smaller vendors to reduce staff or halt deliveries to remote areas. The government offset these pressures with US$50 million in subsidies to wholesalers, a temporary fix that underscores the fragility of such measures.

Long-term vision: Regional integration and climate resilience

Looking beyond crisis management, CARICOM is betting on regional cooperation and sustainable development to dismantle systemic vulnerabilities.

CARICOM Single Market and Economy (CSME): The CSME, a decades-old initiative to create a unified economic bloc, has gained renewed urgency. By harmonising tariffs and streamlining customs procedures, CARICOM aims to boost intra-regional trade from its current 15% to 25% by 2030. Key steps include:

Common External Tariff (CET): A proposed 10% cap on external tariffs for non-CARICOM goods, reducing import costs for member states.

Free movement protocol: Expanding labor mobility to address skill gaps, with 5,000 certified workers (e.g., nurses, engineers) now eligible for hassle-free cross-border employment. Challenges persist, however. Jamaica and Guyana have clashed over agricultural protectionism, while outdated port infrastructure delays shipments. The US$150 million CARICOM Logistics Support Program, funded by the IDB, seeks to modernise ports in Barbados and Suriname by 2026, though progress remains uneven.

Belize’s climate-smart farming initiative: Belize, which imports 70% of its food, launched a US$20 million climate –smart agriculture programme in 2022. The initiative combines satellite−driven precision farming, drought−resistant crop varieties, and subsidies for small holders adopting agro ecology. Early results are promising: maize yields rose by 30%

Dominica’s geothermal revolution: Dominica, reliant on diesel imports for 80% of its energy, is pioneering a shift to geothermal power with a US$45 million EU−funded plant set for completion in 2025. The project, located near the volcanic Roseau Valley, aligns with Dominica’s goal to become the world’s first climate-resilient nation by 2030. Yet, technical setbacks—such as delayed drilling due to seismic activity—highlight the risks of betting heavily on untested renewable infrastructure.

Broader challenges and criticisms

While these strategies signal progress, they face skepticism. Price controls and subsidies risk fiscal instability, as seen in Trinidad’s 2023 budget deficit widening to 6% of GDP. Regional integration, though laudable, is hamstrung by political fragmentation; only 8 of 15 CARICOM states have ratified the CSME’s free movement protocol. Climate projects, meanwhile, depend on fickle foreign aid—90% of Dominica’s geothermal funding comes from the EU, leaving it exposed to shifting donor priorities.

Economist Dr Marla Dukharan warns, “CARICOM’s survival hinges on balancing pragmatism with ambition. Short-term fixes must not derail long-term transformation.” The path forward demands not just policy innovation, but a reimagining of the region’s place in a multipolar world—one where climate resilience and regional unity are currencies of power.

By threading this needle, CARICOM could transcend its role as a collateral casualty of global trade wars and emerge as a model of adaptive, inclusive development. The stakes are existential, but so too is the resolve.

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5. The road ahead: Two futures for CARICOM

By 2030, the Caribbean Community (CARICOM) stands at a crossroads, facing two starkly divergent futures shaped by today’s policy decisions, global economic pressures, and climate realities. One path envisions a resilient, self-reliant region; the other, a cycle of dependency and decline.

In an optimistic scenario, CARICOM emerges as a model of regional unity and innovation. By 2030, intra-regional trade surges to 30%, fueled by the long-delayed success of the CARICOM Single Market and Economy (CSME). A US$500 million regional shipping network, linking ports from Barbados to Guyana, slashes cargo delays and costs, enabling Trinidad’s manufactured goods and Belize’s climate-smart crops to flow freely. Guyana’s oil wealth funds a Pan-Caribbean food security initiative, reducing reliance on volatile global markets.

Simultaneously, renewable energy transitions accelerate, with Barbados achieving 100% solar and wind power and Dominica exporting geothermal energy to neighbouring islands. Regional oil imports plummet by 60%, freeing billions for social programs. Geopolitically, CARICOM navigates US-China tensions with strategic non-alignment, securing a UN-backed Caribbean Resilience Fund supported by both G7 nations and China. This vision hinges on bold leadership, with Prime Minister Mia Mottley framing the mission as “unity over alignment, sovereignty over subservience”.

Conversely, a pessimistic trajectory could see CARICOM unravel under debt, displacement, and foreign dominance. By 2027, Grenada, Saint Vincent, and Antigua default on Chinese loans, triggering IMF bailouts that impose harsh austerity measures. Public sector wages are slashed, utilities privatised, and protests erupt—mirroring Haiti’s 2023 unrest.

Skilled workers flee en masse: 30% of Guyana’s nurses and 40% of Trinidad’s engineers emigrate, leaving aging populations and hollowed-out economies. China capitalises on the chaos, swapping debt for strategic assets like Jamaica’s Kingston Port and Suriname’s bauxite mines. By 2030, Beijing controls 40% of the region’s critical infrastructure, while waning US influence leaves CARICOM isolated in global forums. Rural communities collapse, tourism revenues evaporate, and climate disasters strain underfunded response systems, deepening cycles of poverty.

The region’s trajectory depends on four pivotal factors. First, regional unity must overcome nationalist politics to fast-track CSME reforms. Second, climate finance—particularly grants, not loans—is essential to build hurricane-resistant infrastructure without deepening debt.

Third, geopolitical agility will determine whether CARICOM attracts diversified investment or falls into debt traps. Finally, youth engagement through digital innovation and green jobs could stem brain drain, retaining the talent needed to drive long-term growth.

Ultimately, CARICOM’s future is not predetermined. The optimistic path demands urgent collaboration, climate action, and assertive diplomacy. The pessimistic one reflects the cost of inertia and fragmentation. As hurricanes intensify and global powers vie for influence, the Caribbean’s choices today—between solidarity and division, innovation and dependency—will define its place in the 21st century. Will CARICOM forge a legacy of resilience, or become a cautionary tale of small states overwhelmed by global tides? The answer lies in the courage of its leaders and the solidarity of its people.

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Navigating the new trade order

CARICOM’s survival hinges on agile policymaking and global solidarity. While US tariffs expose vulnerabilities, they also catalyse overdue reforms in regional integration and sustainable development. As Prime Minister Mia Mottley of Barbados asserts, “The Caribbean must turn this crisis into a renaissance of self-reliance.”

Policymakers must prioritise regional trade pacts and climate adaptation, while global partners should expand concessional financing to avert debt crises. Diaspora communities can bolster resilience by investing in local agriculture and tech startups.

Sources:

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