Caribbean economies can be de­scribed as small open economies. This means that in­ter­na­tion­al trade (trade in vis­i­ble and in­vis­i­ble goods) will ac­count for a high per­cent­age of Gross Do­mes­tic Prod­uct (GDP). When trade has a high ra­tio of GDP, it makes an open econ­o­my sus­cep­ti­ble to ex­ter­nal shocks. Trade flows gen­er­ate do­mes­tic in­come, and any surge or pre­cip­i­tous de­cline af­fects GDP, which is a rough proxy for es­ti­mat­ing na­tion­al in­come.

Small coun­tries al­so have few­er nat­ur­al re­sources and there­fore a lim­it­ed range of ex­ports. De­pen­dence on one sec­tor, a nar­row range of ex­ports, or a nar­row range of trad­ing part­ners or coun­tries al­so ex­pos­es a coun­try to the risk of an ex­ter­nal shock.

For ex­am­ple, Bar­ba­dos and many oth­er Cari­com states de­pend pri­mar­i­ly on tourism. Tourism is de­pen­dent on the eco­nom­ic strength of the tourists’ home coun­try. This vul­ner­a­bil­i­ty is ex­ac­er­bat­ed if tourist vis­i­tors come from one coun­try. If the ma­jor­i­ty of Bar­ba­dos vis­i­tor ar­rivals come from Eng­land, an eco­nom­ic down­turn in Eng­land will ei­ther re­duce the num­ber of Eng­lish tourists vis­it­ing Bar­ba­dos or re­duce their ex­pen­di­ture whilst on hol­i­day in Bar­ba­dos. This will hurt the Bar­ba­dos econ­o­my.

Trinidad and To­ba­go is an open econ­o­my which is de­pen­dent on the ex­port of a nar­row range of prod­ucts to a nar­row range of coun­tries. Us­ing the World Bank’s World De­vel­op­ment In­di­ca­tors (WDI), a col­lec­tion of sta­tis­tics from of­fi­cial­ly recog­nised in­ter­na­tion­al sources, vis­i­ble trade as a per­cent­age of GDP av­er­ages 81 per cent for the pe­ri­od 1999 to 2023. In­clud­ing the trade in ser­vices in­creas­es the ra­tio to 92.3 per cent.

More than 80 per cent of the for­eign ex­change gen­er­at­ed comes from nat­ur­al gas prod­ucts or prod­ucts de­rived from nat­ur­al gas. The USA is the coun­try’s largest trad­ing part­ner, ac­count­ing for ap­prox­i­mate­ly 40 per cent of ex­ports and 39 per cent of all im­ports. Chi­na is a dis­tant sec­ond, ac­count­ing for less than 10 per cent of all trade.

These sta­tis­tics il­lus­trate T&T’s macro­eco­nom­ic ex­po­sure. The In­ter­na­tion­al Mon­e­tary Fund’s Eco­nom­ic Out­look pro­ject­ed slow­er world growth. It re­duced the fore­cast for world eco­nom­ic growth by .5 per cent to 2.8 per cent. It slashed the US 2025 growth fore­cast from 2.7 per cent to 1.8 per cent. Giv­en the im­por­tance of the US as T&T’s largest trad­ing part­ner, what hap­pens in the US econ­o­my has im­pli­ca­tions for the per­for­mance of the T&T econ­o­my.

Last week, sev­er­al coun­tries re­port­ed pre­lim­i­nary es­ti­mates of their 2025 first-quar­ter (Jan­u­ary to March) eco­nom­ic per­for­mance, as is cus­tom­ary. In the OECD coun­tries, Eng­land grew by 0.1 per cent, France by 0.1 per cent, Ger­many by 0.2 per cent, and Japan’s rate was 0.8 per cent, all pos­i­tive but less than 1.0 per cent.

In con­trast, ac­cord­ing to the ad­vance es­ti­mate re­leased by the US Bu­reau of Eco­nom­ic Analy­sis, the US re­al gross do­mes­tic prod­uct (GDP) de­creased at an an­nu­al rate of 0.3 per cent in the first quar­ter of 2025 com­pared to an in­crease of 2.4 per cent in the fourth quar­ter of 2024. Chi­na’s growth rate for the same pe­ri­od was pos­i­tive at 1.3 per cent, an­nu­alised at 5.2 per cent.

In the Caribbean, the first quar­ter per­for­mance of Bar­ba­dos was a pos­i­tive 2.6 per cent, whilst Ja­maica de­clined by 1.8 per cent. T&T’s first-quar­ter eco­nom­ic per­for­mance da­ta was un­avail­able at ei­ther the Cen­tral Sta­tis­ti­cal Of­fice (CSO) or the Cen­tral Bank’s Da­ta Cen­tre.

The CSO’s last avail­able quar­ter­ly GDP num­bers were in 2019. In the cur­rent chal­leng­ing world trade con­di­tions, every gov­ern­ment will need up-to-date da­ta to ad­just eco­nom­ic pol­i­cy in the face of the rapid­ly chang­ing ex­ter­nal mar­ket con­di­tions. With­out rel­e­vant da­ta, any gov­ern­ment is like­ly to make se­ri­ous mis­takes.

GDP da­ta is back­wards-look­ing and is not a good in­di­ca­tor of the fu­ture. Un­doubt­ed­ly, the USA’s uni­ver­sal tar­iffs, la­belled by the In­ter­na­tion­al Mon­e­tary Fund as a ma­jor neg­a­tive shock to world growth, will have trick­le-down ef­fects on trad­ing part­ners in its grav­i­ta­tion­al pull. Since the US is T&T’s largest trad­ing part­ner, what hap­pens in the US will lead to a rip­ple ef­fect in T&T. The most se­ri­ous, short-term side ef­fect is like­ly to be in­fla­tion.

Tar­iffs are in­fla­tion­ary as they in­crease the price of im­ports or im­port­ed com­po­nents for pro­cess­ing. Since ap­prox­i­mate­ly 40 per cent of T&T im­ports are sourced in the US, this will lead to im­port­ed in­fla­tion. Sim­i­lar­ly, the de­cline in US growth will al­so damp­en T&T ex­ports to that mar­ket in ad­di­tion to the neg­a­tive im­pact of the uni­ver­sal tar­iff on T&T ex­ports to the US.

The per­for­mance of the US fi­nan­cial mar­kets will al­so af­fect T&T. Trade sur­plus­es with the US have been fi­nanced by pay­ments in US dol­lars, which were then rein­vest­ed in the US mar­ket in the form of stocks or US trea­suries.

De­clin­ing trade sur­plus­es have led to weak­er de­mand for US dol­lars and high­er trea­sury yields. High­er trea­sury yields mean in­creased bor­row­ing costs for T&T if the GORTT con­tin­ues to run deficits un­less the gov­ern­ment al­ters its ex­pen­di­ture pro­file. In ad­di­tion, as the T&T dol­lar is pegged to the US dol­lar, any dol­lar de­pre­ci­a­tion rel­a­tive to oth­er cur­ren­cies means au­to­mat­ic de­pre­ci­a­tion of the T&T dol­lar.

All the eco­nom­ic sce­nar­ios sug­gest that the next few years will be chal­leng­ing.

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al Busi­ness School.