by Alicia Nicholls
U.S. President Donald J. Trump’s renewed ‘America First’ trade policy is a must-watch development for the Caribbean given the U.S.’s role as the region’s primary trading partner – both as an export market and an import source. In 2023, CARICOM countries exported US $9.76 billion in goods to the U.S. market, importing US $18.9 billion from that country, and resulting in a longstanding trade deficit with the U.S. Under the Caribbean Basin Initiative (CBI) and its constituent legislation such as the Caribbean Basin Economic Recovery Act (CBERA) and the Caribbean Basin Trade Partnership Act (CBTPA), most Caribbean Community (CARICOM) member states have enjoyed preferential access to the U.S. market for their goods since the 1980s. Unlike negotiated trade agreements, these trade preferences are unilaterally extended by the U.S. government and are non-reciprocal, meaning that beneficiaries are not required to grant similar trade concessions to U.S. goods. Eligible CARICOM member states also benefited under the U.S. Generalised System of Preferences (U.S. GSP) programme, a wider programme for developing countries, but this expired on December 31, 2020 and is awaiting congressional renewal.
This SRC Trading Thoughts examines the potential implications of President Trump’s economic nationalist trade policy and agenda for CARICOM member states and concludes by offering some possible strategies they could adopt to navigate these evolving trade dynamics.
The First Iteration of “America First” Trade Policy
During President Trump’s first term, he withdrew from the Trans-Pacific Partnership (TPP), imposed tariffs on major trading partners—most notably China and, to a lesser extent, the European Union (E.U.)—and pushed for the repatriation of manufacturing jobs to the U.S. He also halted U.S.-E.U. talks for a Trans-Atlantic Trade and Investment Partnership (TTIP) agreement, and renegotiated the North American Free Trade Agreement (NAFTA), now the United States-Mexico-Canada Agreement (USMCA). This stance also led to an obstructionist approach at the World Trade Organization (WTO), including attempting to block the appointment of Dr. Ngozi Okonjo-Iweala as the Director-General and successfully blocking the appointment or reappointment of Appellate Body members (judges), which resulted in the WTO’s Appellate Body being unable to hear appeals since December 2019.
Of particular concern for Caribbean countries was a proposal entitled “Procedures to Strengthen the Negotiating Function of the WTO” repeatedly submitted by the Trump administration at the WTO’s General Council meetings in his first term. If accepted by members, this would have barred WTO developing country members from being eligible for special and differential treatment (S&DT) under the WTO’s agreements if they met any of four criteria, including if they were classified as ‘high income economies’ by the World Bank. Under this criterion, at least four CARICOM countries (Antigua & Barbuda, Barbados, St. Kitts & Nevis and Trinidad & Tobago) would have become ineligible for special and differential treatment in current or future WTO negotiations or under any of the Agreements coming out of such negotiations. The Trump proposal failed to gain significant traction and the Biden Administration withdrew it.
Despite these developments, President Trump’s first-term trade policies had minimal direct impact on CARICOM countries. Given the U.S.’s substantial trade surplus with the region and the bipartisan support historically enjoyed by the CBI, Caribbean countries were largely insulated from the more aggressive components of the ‘America First’ Trade Policy 1.0. The CBERA is ‘permanent’ (albeit subject to periodic WTO waivers), and the CBTPA, which was due to expire in 2020, was renewed by Congress until 2030. However, as these trade preferences remain unilaterally granted, they are inherently vulnerable to future revocation.
‘America First’ Trade Policy 2.0: What Lies Ahead?
The broad contours of President Trump’s second-term trade policies can be discerned from a memorandum outlining his ‘America First’ Trade Policy 2.0, one of several Executive Orders he signed on his first day in office. This memorandum outlined a strategy to prioritize the U.S. economy, workers, and national security. The memorandum directs key officials to do five main things as a matter of priority: investigate trade deficits, establish an external revenue service, identify unfair trade practices, review and assess the impact of the USMCA in preparation for the July 2026 review, and evaluate the currency policies of major U.S. trading partners.
While the Caribbean has not featured in any of President Trump’s trade plans to date, some potential secondary risks and challenges for the region can already be anticipated. First, the expansion of tariff-based trade measures could impact the region given President Trump’s penchant for using tariffs to tackle both trade and non-trade disputes. Moreover, on February 13, the President issued a Presidential Memorandum directing the creation of a comprehensive strategy to promote ‘fairness’ in U.S. trade relations and address non-reciprocal trade agreements. This ‘fair and reciprocal’ plan would match U.S. tariffs with those charged by other countries on U.S. imports. If implemented, this plan potentially violates the spirit of the WTO’s Most Favoured Nation (MFN) treatment principle. Put simply, this core principle requires WTO members to not discriminate in their treatment amongst each other, except in instances where there is a free trade agreement or customs union or in cases of special and differential treatment. This plan could create uncertainty for businesses in the U.S. and those which export to or import from the U.S. using these preferential arrangements. Specifically, this raises the question of what this new policy means for the U.S.’ unilateral preferences programmes like CBI and the Africa Growth Opportunity Act (AGOA).
Second, although the U.S.-Caribbean trade relationship may remain largely stable, the region could experience indirect fallout from Trump’s trade and wider economic policies. Increased tariffs on imports, particularly from China, could drive up costs for American manufacturers. These costs may, in turn, be passed on to consumers in the U.S., including Caribbean diasporic communities, as well as to Caribbean consumers who rely on imported U.S. goods. As noted, the U.S. is a major source of imported goods into the region, including food stuffs.
Third, Trump’s emphasis on cutting funding for various agencies and deregulation may result in relaxed sanitary and phytosanitary (SPS) standards. Caribbean authorities should monitor these developments closely, as they could potentially affect the quality and safety of food and other products imported from the U.S.
Fourth, a continued obstructionist stance towards the WTO, the potential for U.S. renewed interest in introducing eligibility criteria for S&DT, and the possibility of escalating trade wars could further weaken the rules-based multilateral trading system, which while imperfect, provides some modicum of a safety net for small States. Its weakening could expose Caribbean economies to greater vulnerabilities, including from escalating trade wars.
Strategic Responses for the Caribbean
First, it is essential to recognize that this situation is evolving, and several of these proposals remain under consideration rather than constituting definitive actions. However, it is important to be proactive. To safeguard regional trade interests, Caribbean governments and trade representatives should continue to actively engage with U.S. lawmakers, the U.S.-based Caribbean diaspora and other stakeholders to ensure continued support for preferential trade programs like the CBI. This engagement should be evidence-based and could involve studying what could be the potential economic fall-out for the region of the removal of CBI preferences for Caribbean exports to the U.S.
The upcoming routine U.S. International Trade Commission (USITC) hearings on the CBERA’s impact on U.S. Industries and Consumers and on Beneficiary Countries are a good opportunity for the region to have its voice heard. A unified CARICOM voice can help the region navigate this shifting global landscape and advocate for its interests effectively. Like under the previous administration, individual US states could also be allies.
Second, continuing to expand trade relationships beyond the U.S. by strengthening economic ties with other partners, including the European Union, Latin America, and emerging markets in Africa and Asia could reduce dependency on the U.S., creating new opportunities for CARICOM exporters.
Third, supporting regional industries, increasing intra-Caribbean trade, and promoting food security can help reduce reliance on external markets and mitigate potential economic shocks stemming from these uncertainties. It is likely that these matters will occupy CARICOM Heads of Government as they meet in Barbados on February 19-20 for their 48th Regular meeting.
As President Trump’s second term unfolds, Caribbean countries must remain vigilant, united and proactive in responding to shifts in U.S. trade policy. By strengthening diplomatic engagements, diversifying economic partnerships, and fostering regional economic resilience, the Caribbean can better position itself to navigate the trade and economic uncertainties of ‘America First’ 2.0.
Alicia Nicholls is the SRC’s Junior Research Fellow. Learn more about the SRC here: www.shridathramphalcentre.com.