Barbados could be impacted by an economic fallout of between $88.9 million and $157.6 million caused by a hike in tariffs by the United States.
That is the estimate of Central Bank of Barbados experts who assessed the gross domestic product (GDP) impact of the import tax measures announced by US President Donald Trump.
This follows a year in which Barbados imports from the US reached a record $1.6 billion while exports to that market were $161.1 million.
They have concluded that the US government’s imposition of a ten per cent baseline tariff on all imports last month “introduces meaningful downside risks to Barbados’ economy”.
Exports and tourism
An analysis prepared by the Central Bank’s Research and Economic Analysis Department found direct and indirect impacts for Barbados’ exports and the tourism sector.
Their baseline calculation was an estimated GDP loss of $88.9 million, assuming there is a 7.5 per cent drop in tourism from the US and a $15.6 million export loss. The severe scenario found an export and tourism loss of $157.6 million based on a 15 per cent
drop in US tourists and a $17.8 million export loss.
“As a small, open economy deeply integrated with the US through trade and tourism, Barbados faces pressures on exports, inflation and fiscal performance,” the Central Bank analysis states.
“Merchandise exports are likely to register a moderate decline. Export earnings could decline by $15.6 to $17.8 million, particularly in sectors like rum, jewellery and niche manufacturing. This translates into real GDP losses of $23.4 to $26.7 million, after applying conservative multipliers.
“The shock is concentrated in high-value categories with price-sensitive demand and significant exposure to global competition.”
The department also flagged the tourism sector’s vulnerability to the directs, but said that any fallout would not be due directly to the tariffs, but from “second-round effects, including a potential slowdown in the US economy, the knockon impact of US tariffs on other global trade partners if the pre-90-day pause levels are returned to, and rising global uncertainty”.
“These forces may dampen discretionary travel, reduce US household spending and weaken airline connectivity. A 7.5 to 15 per cent decline in US travel spending – driven by these broader macroeconomic pressures – could result in real GDP losses of 1.04 to 2.07 per cent,” the analysis warned.
“This underscores the urgency of further diversifying Barbados’ tourism source markets and strengthening resilience across the sector.”
The Central Bank team said these possible outcomes meant that “Barbados’ economic safety buffers will be vital”.
“While Barbados’ foreign reserves and fiscal buffers remain strong, the fixed exchange rate limits monetary policy responses. Fiscal policy may face stress from rising subsidies and falling value added tax collections linked to tourism and trade,” the experts said.
“More must be done to ensure resilience. This external shock underscores the urgency of export diversification, logistics resilience and deeper CARICOM integration, especially in food security and regional market access.
“Barbados’ response will determine whether this episode becomes a moment of vulnerability or a catalyst for structural transformation.”
The Central Bank report also examined Barbados merchandise trade structure, which it described as “structurally imbalanced, with high dependence on a few partners”.
“As a small, open economy with limited natural resources and a modest manufacturing base, Barbados relies heavily on imports for domestic consumption and production,” it said.
“While merchandise exports generate foreign exchange and growth, the trade account has remained persistently in deficit.”
The existence of this deficit is confirmed in the Central Bank’s first
quarter economic review that was presented by Governor Dr Kevin Greenidge on Wednesday.
“Higher imports and lower exports of goods widened the merchandise trade deficit. The deficit expanded by $143 million compared to the first quarter of 2024,” he said.
Largest increase
“Imports increased by 13.3 per cent, driven by higher demand for machinery, food and beverages, and hybrid and electric vehicles, marking the largest first-quarter import increase – outside the pandemic period – since 2011.
“Total exports declined by 2.6 per cent, as re-exports fell by 6.1 per cent, largely due to reduced fuel shipments. Domestic exports also declined by 2.2 per cent, reflecting lower sales of food and beverage products.”
The Central Bank research noted that the US remained Barbados’ number one trading partner for goods between 2002 and 2024, followed by Trinidad and Tobago, and the United Kingdom.
“The US is Barbados’ largest import source, supplying nearly 88.5 per cent of US-sourced goods from domestic production and 11.5 per cent through re-exports. Key imports include food, machinery, and fuel,” the Central Bank team reported.
“In 2024, imports from the US reached a record $1.6 billion. This heavy concentration leaves Barbados vulnerable to US tariff changes. While the recent ten per cent baseline tariff may not hit all categories equally, finding cost-effective alternative suppliers in the short term may prove challenging.”
The US remains Barbados’ largest export destination, particularly for rum, jewellery and sweet biscuits, the Central Bank noted. (SC)
