The Caricom Private Sector Organisation (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 US’s third-largest import partner. Nearly 70% of final imported goods — valued at US$7.7 billion — originate from the US.
These findings were presented on 10 September during a hybrid forum titled “De-risking 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.
Growing Trade Deficit presents economic risks
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% to 15% 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% 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, over-dependence on a single source of imports clearly does not benefit us,” Dr Antoine emphasised.
Caricom’s heavy dependence 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% of its imports from the US, and St Kitts and Nevis, where 47% to 51% of import trade originates from the US.
Cascading effects and regional vulnerabilities
The CPSO warned that US tariffs will likely trigger additional cascading effects through duties imposed on goods entering the US before transhipment 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.
The Eastern Caribbean Currency Union (ECCU) faces particular vulnerability, with Member States collectively sourcing 44.4% of their imports from the US. Unlike some Caricom States, which import raw materials for processing and re-export, ECCU Member States primarily import finished goods, offering limited opportunities for value-added production.
Strategic diversification opportunities
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% of non-fuel goods (including food products) and 23% of mineral fuels could be sourced more cost-effectively from alternative markets. Remarkably, 94.7% of non-fuel imports and 85.8% of total imports (including fuel) could be competitively sourced from other suppliers.
Promising alternative markets
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.
The analysis projects that the Caricom Single Market and Economy (CSME) could realise annual savings of US$1.3 billion on US imports, representing 16.4% of total import value. The largest opportunities exist in machinery and electrical equipment sectors, both critical to construction, foreign direct investment and broader economic development.
Infrastructure challenges and solutions
To capitalise on these opportunities, the study emphasised the need for improved trade facilitation and port logistics. An assessment of weekly liner connectivity from 17 potential supplier countries revealed that Jamaica’s Port Kingston maintains the highest regional connectivity, with Trinidad and Tobago’s Port of Spain ranking second.
Many Organisation of Eastern Caribbean States (OECS) ports, however, including in St Kitts and Nevis, have limited or no direct liner connectivity, creating significant barriers to developing new trade relationships. The CPSO stressed that Eastern Caribbean countries must also prioritise port infrastructure upgrades if they are to capture import diversification benefits.
Vision for regional trade hub
ECCB Governor Timothy Antoine reinforced the urgency of movement toward these solutions. He challenged the region to leverage its strategic geographic position between the Americas, Africa and Europe to establish itself as a bidirectional trade logistics hub. This transformation could create a new growth engine alongside energy security initiatives and digital transformation efforts.
Moving ahead
The results of the research presented during the forum can contribute to strategic responses by Caricom targeting the diversification of import and export markets; leverage the locational advantages of Caricom States; and introduce urgent policy changes to benefit from the shifts in regional and global supply chains. Such a regional response must deliver on the inherent opportunities for alternative sources of imports, in addition to developing the significant opportunities for further expansion of production and trade within the CSME. Increasing the competitiveness of Caricom goods in the US markets, for the cohort of goods that have maintained their market positioning/appeal, must also continue as part of Caricom’s strategic response, Dr Antoine told the gathering.
CPSO
