BRIDGETOWN, Barbados, CMC – The Governor of the Central Bank of Barbados (CBB), Dr. Kevin Greenidge, says the recent decision by United States President Donald Trump to implement a series of trade tariffs on countries worldwide, including the Caribbean, underscores the urgency of export diversification, supply chain de-risking, and deeper regional integration, especially in food security, logistics, and tourism market development.
Trump has announced far-reaching new tariffs on nearly all US trading partners, including a 125 percent tax on imports from China and 20 percent on the European Union. Economists and other traders say the move is designed to dismantle much of the global economy’s architecture and trigger broader trade wars.
In the Caribbean, Trump announced a 10 percent tariff on most regional countries, while in Guyana, the tariff is as high as 38 percent.
In a working paper providing essential insights for businesses, policymakers, and financial professionals, Greenidge said gross domestic product (GDP) growth projections could require adjustments ranging from 1.3 to 2.3 percent depending on scenario outcomes.
He said inflation pressures could increase to 3.7 percent from trade effects, potentially reaching 4.5 percent if additional shipping costs materialize. US tourism flows may experience modest declines, with baseline scenarios suggesting 7.5 percent reductions.
Greenidge said that debt-to-GDP ratios could see upward pressure, though remaining within manageable parameters, and that Barbados’ fixed exchange rate adds complexity compared to regional peers such as Jamaica and Trinidad and Tobago, with different monetary arrangements.
The policy paper evaluates the macroeconomic consequences of the 2025 US global tariff hikes on Barbados.
Greenidge said that with a 10 percent tariff imposed across all imports, the US action poses multidimensional risks to Barbados as a small, open economy with deep trade and tourism linkages to the US market.
He said goods exports to the US are projected to contract by BDS$15.6 to BDS17.8 million (One BDS$=US$0.50 cents) due to higher landed prices and increased competition from alternative suppliers. Applying conservative multipliers results in real GDP losses of BDS$23.4 to BDS$26.7 million, equivalent to 0.23 to 0.26 percent of GDP.
In the tourism sector, where the US contributes roughly one-third of all long-stay visitors, modeled declines of 7.5 percent (baseline) to 15 percent (severe scenario) in US travel spending are estimated to produce GDP losses of 1.04 to 2.07 percent, respectively.
“The total GDP impact (losses) could range from 1.27 to 2.33 percent under the adverse scenario, depending on scenario severity, and reflects both direct and multiplier-adjusted effects across export and tourism.”
Greenidge says the inflation outlook has deteriorated. Tariff-driven cost increases, particularly in food and energy, are expected to raise Barbados’ total inflation to 3.2 to 3.7 percent in a tariff-only scenario and up to 4.5 percent if shipping fees are also imposed.
He said these price pressures are transmitted through high US import dependence (30 percent for food, 85 percent for fuel), exacerbated by fragile Caribbean shipping networks. Food inflation may rise by up to 3.2 percent and energy inflation by 4.7 percent, straining household budgets and dampening real incomes.
The Central Bank Governor argues that the fixed exchange rate regime constrains Barbados’ monetary policy response.
“With the Barbados dollar pegged to the US dollar at 2:1, the Central Bank cannot rely on currency depreciation to absorb shocks. Rising international interest rates could help contain global inflation but would impose costs on the tourism and construction sectors and raise debt servicing burdens.
“Foreign reserves remain strong at BDS$3.4 billion, or 32.4 weeks of import cover, as at end-March 2025, providing some insulation but limited flexibility.”
However, he said that revenue pressures may emerge on the fiscal side as import values fall and tourism activity softens.
The government’s strong fiscal position, with a primary surplus of 3.5 percent of GDP in the financial year 2024/25, is expected to come under stress. Public debt, which had declined to just over 100 percent of GDP, could rise back to 108–112 percent under stress scenarios. Greenidge said additional costs may arise from food and energy subsidies, estimated at $85–100 million, and stabilization transfers to vulnerable households.
“In summary, the 2025 US tariffs introduce non-trivial risks to Barbados’ near-term growth, inflation stability, and fiscal sustainability. While Barbados remains resilient due to robust reserves and sound public finance reforms, this shock underscores the urgency of export diversification, supply chain de-risking, and deeper regional integration, especially in food security, logistics, and tourism market development,” Greenidge said.
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