Study identifies US$1.3b in potential savings through CARICOM import diversification amid US tariffs

The CARICOM Private Sector Organization (CPSO) has estimated that CARICOM member states could achieve annual savings of US$1.3 billion by diversifying their import sources away from the United States, particularly as escalating reciprocal tariffs increase costs and expand the regional trade deficit.

The region currently serves as the United States’ third-largest import partner. Nearly 70 per cent of final imported goods – valued at US$7.7 billion – originates from the US.

These findings were presented on September 10 during a hybrid forum titled “Derisking CSME Imports: Examining the Scope for Goods Market Fulfillment from Non-Traditional Sources.”

The event was hosted by the CPSO in collaboration with the Eastern Caribbean Central Bank (ECCB) at the bank’s headquarters in St Kitts and Nevis.

CPSO CEO and Technical Director Dr Patrick Antoine presented findings from a comprehensive study revealing troubling trends in the region’s goods trade deficit with the United States.

The deficit increased by approximately US$200 million between 2022 and 2023, followed by an additional US$300 million increase from 2023 to 2024. Projections indicate a further US$500 million expansion between 2024 and 2025 even without considering the tariff impacts.

The new tariff regime, imposing 10 per cent to 15 per cent duties on previously duty-free goods, will drive costs upward by a significant degree. The study projects that with the implementation by the US of 15 per cent reciprocal tariffs on Trinidad and Tobago and Guyana in July, the region’s projected export revenue loss would increase to US$653.6 million.

“While trade openness supports economic activity and consumer welfare, overdependence on a single source of imports clearly does not benefit us,” Dr Antoine emphasised.

RELIANCE ON US IMPORTS

CPSO Chairman Gervase Warner, in his remarks, also referred to the region’s substantial reliance on US imports, noting, “CARICOM consistently ranks third in terms of import share from the US, positioned closely behind Mexico and Canada.”

He pointed to specific examples, including The Bahamas, which sources over 60 per cent of its imports from the US and St Kitts and Nevis, where 47 per cent to 51 per cent of import trade originates from the US.

The CPSO warned that US tariffs will likely trigger additional cascading effects through duties imposed on goods entering the US before transshipment to the Caribbean. This secondary inflationary pressure, combined with rising domestic labour costs, threatens to increase living and business costs throughout the region while also posing threats to the competitiveness of Caribbean tourism offerings.

To enhance economic resilience, the CPSO recommends strategic import market diversification, which could deliver substantial cost savings, protect consumers from price volatility, and improve competitiveness in key sectors, including manufacturing and tourism.

The comprehensive analysis undertaken by the CPSO examined 1,251 product lines worth over US$9.1 billion, identifying significant opportunities to reduce US import dependence.

The study found that 32 per cent of non-fuel goods (including food products) and 23 per cent of mineral fuels could be sourced more cost-effectively from alternative markets. Remarkably, 94.7 per cent of non-fuel imports and 85.8 per cent of total imports (including fuel) could be competitively sourced from other suppliers.

The study identified several alternative markets with substantial potential, including Malaysia, Brazil, the Netherlands, Spain, Turkey, South Africa, Estonia, Bulgaria, Portugal, and Mexico.

Notably, certain markets such as South Africa and Turkey offer large volumes of goods at approximately half the US price.

editorial@gleanerjm.com