BRIDGETOWN, Barbados – 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.
Dr. Kevin GreenidgeTrump has announced far-reaching new tariffs on nearly all US trading partners ranging from a 125 per cent tax on imports from China and 20 per cent on the European Union, among others, in a move economists and other traders say is designed to dismantle much of the architecture of the global economy and trigger broader trade wars.
In the case of the Caribbean, Trump announced a 10 per cent tariff on most regional countries, while in the case of Guyana, the tariff is as high, as 38 per cent.
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 per cent depending on scenario outcomes.
He said inflation pressures could increase to 3.7 per cent from trade effects, potentially reaching 4.5 per cent if additional shipping costs materialize and that US tourism flows may experience modest declines, with baseline scenarios suggesting 7.5 per cent 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 U.S. global tariff hikes on Barbados.
Greenidge said that with a 10 per cent 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, result in real GDP losses of BDS$23.4 to BDS$26.7 million, equivalent to 0.23 to 0.26 per cent of GDP.
In the tourism sector, where the US contributes roughly one-third of all long-stay visitors, modeled declines of 7.5 per cent (baseline) to 15 percent (severe scenario) in US travel spending are estimated to produce GDP losses of 1.04 to 2.07 per cent, respectively.
“Taken together, the total GDP impact (losses) could range from 1.27 to 2.33 per cent 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 per cent in a tariff-only scenario and up to 4.5 per cent if shipping fees are also imposed.
He said these price pressures are transmitted through high US import dependence (30 per cent for food, 85 per cent for fuel), exacerbated by fragile Caribbean shipping networks. Food inflation may rise by up to 3.2 per cent, and energy inflation by 4.7 per cent, straining household budgets and dampening real incomes.
The Central Bank Governor argues that Barbados’ monetary policy response is constrained by the fixed exchange rate regime.
“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.”
But he said that on the fiscal side, revenue pressures may emerge as import values fall and tourism activity softens.
The government’s strong fiscal position, with a financial year 2024/25 primary surplus of 3.5 per cent of GDP, is expected to come under stress. Public debt, which had declined to just over 100 per cent of GDP, could rise back to 108–112 per cent 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 U.S. 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.
