Editorial | Navigating uncertainty

Modern economics used to treat uncertainty like bad weather. When recession threatened, uncertainty rose. When growth returned, it eased. During supply shocks or financial disruptions, you wait until things settle down.

You listen to the weather reports and hope for the best outcome.

But today’s global economy has entered a new era – one in which uncertainty is not merely cyclical, it is increasingly structural.

This new reality is the context within which Jamaica and its Caribbean Community (CARICOM) partners should view the European Union’s long-delayed approval of its massive trade deal with the South American bloc, Mercosur.

It is not just a Brussels story about farmers, beef and soybeans. It is a strategic signal that the global economy is reorganising into rival trade blocs, and Jamaica and the Caribbean are standing in the middle of the new geopolitical and economic crosswinds.

A significant background element to these developments is America’s new US National Security Strategy (NSS), published December 2025. It reflects a decisive shift as the world’s largest economy is now treating trade, tariffs, technology controls and industrial subsidies as key instruments of national security and geopolitical competition.

The clear message from the US is that trade will no longer be governed mainly by shared rules and predictable norms. It will increasingly be governed by strategic alignment which puts the US first. Countries will be pressured (explicitly and implicitly) to choose lanes.

When a big power does this, they may call it “sovereignty”. For small states like Jamaica, it exposes their fragility and dependence. Bigger powers like the EU have a few other options.

DIVERSIFYING

Europe has responded in the way rational actors do when the environment becomes hostile: it is diversifying for survival. The EU-Mercosur deal (more than 25 years in the making) creates one of the world’s largest free trade areas and removes tariffs on more than 90 per cent of products. The EU expects major gains for exports like vehicles, machinery, wines and spirits, and claims businesses will save billions annually in duties.

But the deeper story is this: Europe wants strategic leverage in Latin America as protectionism rises and US tariff policy becomes more uncertain – and even threatening.

Indeed, global indices of economic uncertainty (including widely cited measures like the Economic Policy Uncertainty Index) have been operating at unusually high levels, repeatedly spiking around major disruptions: trade wars, the pandemic, wars in Europe and the Middle East, and now the escalating security-driven economic confrontation between the US and China.

UN Trade and Development has warned that economic policy uncertainty reached extreme levels in early 2025; among the highest recorded this century. The Organisation for Economic Co-operation and Development also points to policy uncertainty, tariffs, and weakening confidence as major drags on investment and growth.

Uncertainty is not simply about feelings. It has predictable economic effects: firms delay investment, postpone hiring, increase cash holdings, and reduce long-term commitments. If uncertainty is the enemy of investment, investment is the mother of growth.

Jamaica, therefore, faces a real challenge. With an annual average expansion of GDP of less than one per cent for over 20 years, the country is trying to solve a long-standing growth problem in a global environment that is actively discouraging risk-taking and investment.

SERIOUS IMPLICATIONS

The implications for the Caribbean are serious. And they are not limited to trade.

First, the region is facing a global move into bloc economics. Trade and finance will increasingly flow along geopolitical lines, not purely according to commercial logic.

Jamaica, therefore, must assume that the external environment will not remain open, rules-based, and predictable. Multilateralism is decaying rapidly.

Second, the island’s tourism economy is vital, it will have to contend with increasing uncertainty – even fragility. Tourism thrives on consumer confidence, stable airlift, stable energy costs and stable global conditions. In periods of uncertainty, travel is among the first expenditures households cut. So planned investments in rooms may be delayed or abandoned.

Third, food and commodity price volatility is likely to intensify. The EU-Mercosur deal could potentially reshape global commodity flows. For import-dependent Caribbean countries, any reordering of trade routes and pricing mechanisms increases exposure. Food security, therefore, must be treated as economic security - not merely agricultural policy.

Fourth, financing risks will rise. In global shocks, investors flee to safety. Risk premiums rise for emerging markets. The Caribbean could be hit, even though the region did not cause the crisis. This is why resilience financing and disaster liquidity must remain priorities, not luxuries.

Fifth, the geopolitical pressure will intensify. The US National Security Strategy is explicit about America’s intention of hemispheric dominance and the strategic contest with China. Caribbean states will be increasingly pressured to abandon engagement with China over ports, telecoms, digital infrastructure, technology procurement and diplomatic positioning.

This era demands a deeply thoughtful response, requiring sane, balanced and strategic diplomacy. Despite the paralysing rhetoric of the last few weeks, CARICOM needs a practical doctrine for navigating this era of chronic uncertainty. The region must, against the odds, work to:

• diversify trade and investment partnerships to avoid excessive dependency on any one bloc;

• build regional food resilience (not autarky, but redundancy);

• strengthen disaster risk financing and rapid liquidity, because shocks are now more frequent;

• implement industrial policy for tradables - especially agro-processing and digital services;

• treat logistics - ports, shipping reliability, airlift - as national and regional competitiveness infrastructure.

CARICOM’s leaders must not allow fear to silence the region into total submission or the disintegration of institutions.

Regional governments, Jamaica included, must track and share global uncertainty indices linked to tariffs, freight costs, financial conditions, and geopolitical risks.

A future of shocks, uncertainty and instability is no longer a forecast; it is the region’s permanent operating reality.