by Ali­cia Nicholls

US Pres­i­dent Don­ald J. Trump’s re­newed ‘Amer­i­ca First’ trade pol­i­cy is a must-watch de­vel­op­ment for the Caribbean giv­en the US’s role as the re­gion’s pri­ma­ry trad­ing part­ner – both as an ex­port mar­ket and an im­port source.

In 2023, Cari­co coun­tries ex­port­ed US$9.76 bil­lion in goods to the US mar­ket, im­port­ing US$18.9 bil­lion from that coun­try, and re­sult­ing in a long­stand­ing trade deficit with the US. 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 US mar­ket for their goods since the 1980s. Un­like ne­go­ti­at­ed trade agree­ments, these trade pref­er­ences are uni­lat­er­al­ly ex­tend­ed by the US gov­ern­ment and are non-rec­i­p­ro­cal, mean­ing that ben­e­fi­cia­ries are not re­quired to grant sim­i­lar trade con­ces­sions to US goods. El­i­gi­ble Cari­com mem­ber states al­so ben­e­fit­ed un­der the US Gen­er­alised Sys­tem of Pref­er­ences (US 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 (EU)—and pushed for the repa­tri­a­tion of man­u­fac­tur­ing jobs to the US. He al­so halt­ed US-EU 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 US’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 US 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 US 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 US trade re­la­tions and ad­dress non-rec­i­p­ro­cal trade agree­ments. This ‘fair and rec­i­p­ro­cal’ plan would match US tar­iffs with those charged by oth­er coun­tries on US 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 US and those which ex­port to or im­port from the US us­ing these pref­er­en­tial arrange­ments. Specif­i­cal­ly, this rais­es the ques­tion of what this new pol­i­cy means for the US’s uni­lat­er­al pref­er­ences pro­grammes like CBI and the Africa Growth Op­por­tu­ni­ty Act (AGOA).

Sec­ond, al­though the US-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 US, in­clud­ing Caribbean di­as­poric com­mu­ni­ties, as well as to Caribbean con­sumers who re­ly on im­port­ed US goods. As not­ed, the US 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 US 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 US law­mak­ers, the US-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 US.

The up­com­ing rou­tine US In­ter­na­tion­al Trade Com­mis­sion (USITC) hear­ings on the CBERA’s im­pact on US 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 US 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.