A Caribbean Perspective on Recent US Policy Shifts

The United States is the Caribbean11 region's largest trading partner. Moreover, the United States is the primary source market and destination for Caribbean tourism and home to a substantial diaspora, whose remittances help stabilize the region's small, open economies.

Recent U.S. policies introduced under President Donald Trump's America First trade policy and the One Big Beautiful Bill Act risk the future of this trade relationship and the overall economic stability of the region. The changes - reciprocal tariffs, a suspension of de minimis treatment22, a new visa regime, and excise taxes on remittances - have the potential to place new costs on American and Caribbean citizens and businesses alike. These changes encourage Caribbean countries to search for new partnerships elsewhere, including with China.

Although the United States has every sovereign right to pursue policies that advance its economic and national security objectives, these measures could generate unintended strategic consequences in a region that is not a structural contributor to the U.S. trade deficit and with which the United States actually has a trade surplus, with spillover effects for U.S. suppliers and for U.S.-Caribbean relations.

A History of Partnership

U.S.-Caribbean economic engagement has rested on the premise that regional economic stability strengthens U.S. security, expands export markets, and reduces vulnerability to authoritarian influence. Reflecting this logic, in 1983, then-President Ronald Reagan launched the Caribbean Basin Initiative (CBI) to provide nonreciprocal, duty-free access for most Caribbean exports. The partnership reinforced decades of mutual respect and solidarity between the United States and Caribbean countries and promoted economic stability.

As a partial consequence of the program, the United States remains the region's largest trading partner, supplying over half of its imports ($11.6B33) and receiving around 30% of its exports ($17.6B) - generating a $6B surplus in 2024. Caribbean economies are therefore not drivers of the U.S. global trade deficit and are purchasers of U.S. products44. Figure 1 shows this trade from 2020 through 2024.

A Worrying Shift

The new economic policies run the risk of undermining the U.S.-Caribbean relationship, with increasing costs incentivizing Caribbean firms to diversify away from U.S. suppliers.

Reciprocal Tariffs and End of De Minimis Treatment

In 2025, under its America-First Trade Policy, the Trump administration used emergency powers under the International Emergency Economic Powers Act to implement sweeping policies to address the United States' persistent trade deficit. Among them was a system of so-called reciprocal tariffs, which imposed a minimum 10% tariff on virtually all countries and additional tariffs on those countries with which the US has a trade deficit, such as Guyana and Trinidad and Tobago55. Though these tariffs were recently deemed unconstitutional by the United States Supreme Court, the administration has vowed to find new legal pathways to retain them. Specifically, it has announced that it will use Section 122 of the 1974 Trade Act to maintain these blanket 10% tariffs temporarily66.

The administration's tariffs, if retained under other legal avenues, risk the future of this trade surplus, as well as increasing the costs that Americans pay for Caribbean goods. Although tariffs are paid by U.S. importers, these costs are often passed on to consumers, increasing expenses for U.S. households. A recent Tax Foundation study found that the tariffs cost the average American household an additional $1,000 in total in 2025.

In a stated effort to address drug smuggling (particularly fentanyl) and to protect U.S. manufacturers from unfair competition, the administration suspended the longstanding de minimis exemption in August 2025.77 The exemption under the 1930 Tariff Act previously permitted packages with a customs value of less than $800 to enter the United States duty and tax-free and to undergo expedited clearance regardless of the country of origin. Following the suspension, all such imports must now undergo formal or informal Customs and Border Protection procedures to be assessed for and secure payment of relevant duties, charges, and fees. This not only causes higher costs for importers it also creates potential delays for U.S. shoppers, manufacturers, and retailers.

The de minimis removal has also added new costs that can be passed along to average Caribbean families. U.S. airlines have indicated that they will only transport items containing goods to the United States if advanced duty-collection and indemnification arrangements88 have been paid. As a result of the new policy, some postal services in the region have also suspended the sending of packages containing goods to the United States. This has affected many small e-commerce businesses in the Caribbean, which import and export packages to the United States. These businesses support Caribbean households and help contribute to the region's economic stability.

This policy unpredictability has increased uncertainty for firms and led them to diversify their supply chains and markets. As a result, Caribbean businesses are increasingly sourcing from non-U.S. firms, particularly those based in China. If policy choices incentivize Caribbean firms and countries to rebalance outward, U.S. commercial influence and competitiveness will probably diminish in the region.

Visa Policies

U.S.-Caribbean travel and trade could be affected by the administration's evolving visa regime. Since 2016, more than one million people from the Caribbean have traveled to the United States each year, accounting for 2% of U.S. international arrivals99. See Figure 2 for breakdowns by country.

These Caribbean visitors - traveling to shop, visit family, or conduct business - inject money directly into the U.S. economy by purchasing tickets on American-owned airlines; staying at U.S. hotels, motels, or in airbnbs; patronizing supermarkets and restaurants; and purchasing U.S. products, which they ship back to the Caribbean. Most Caribbean visitors also have low visa overstay rates1010.

Discouraging legitimate Caribbean business and leisure travel to the United States by introducing the inflation-adjusted visa fee directly impacts U.S. businesses that benefit from Caribbean travelers. Although it is too early to empirically state the impact, many Caribbean residents are anecdotally opting to go to cheaper and more welcoming destinations elsewhere in the region.

Excise Tax on Remittances

Coupled with the new tariff regime, the administration worked with allies in Congress to pass the One Big Beautiful Bill Act, which included a 1% excise tax on applicable remittance transactions when the sender pays with cash, a money order, a cashier's check, or similar physical instrument, inter alia. Payments from bank accounts and other financial institutions and with U.S.-issued debit or credit cards are exempt.

At the macrolevel, remittances from the Caribbean diaspora in the United States are an important stabilizing inflow for several economies and in some cases exceed foreign direct investment flows as a source of foreign private capital inflows. In Haiti and Jamaica, remittances account for as much as 16% of GDP. Moreover, unlike other foreign private capital inflows, remittance flows tend to be countercyclical, meaning they usually increase during periods of economic downturn in the home country, cushioning external shocks.

At the microlevel, these flows support household consumption and reduce poverty.

While exempting bank and card-based transfers, the 1% measure disproportionately affects lower-income households and the underbanked, who rely on cash channels. When formal transfer costs increase, remittance flows might shift toward informal mechanisms, undermining transparency and weakening anti-money-laundering/terrorist financing and proliferation financing objectives.

A Path Ahead

Despite the challenges, there is still time to revise some of these policies in ways that safeguard U.S. strategic objectives without prejudicing Caribbean development. The author of this paper recommends the following actions:

• Suspend the Section 122 tariffs on Caribbean countries. Caribbean countries are not a contributor to the United States' balance of trade deficit and, therefore, not a contributor to the country's balance of payment deficit.
• Reinstitute the de minimis exemption or reduce the applicable value to ease the delays and costs being experienced by U.S. households and importers.
• Implement a risk-tiered integrity fee structure for B1/B2 visa applicants1111, reducing or waiving the fee for countries with overstay rates below 2% for the previous five fiscal years. Expand interview waiver eligibility for low-risk, repeat travelers with no visa overstays or other immigration violations.
• Exempt small-value remittance transfers (perhaps $250 or less) or up to an annual threshold per sender (perhaps $3,000) from the tax in order to prevent people from shifting to informal and less secure means of remittance transfers.
• Institutionalize more frequent meetings under the U.S.-CARICOM Trade and Investment Council and establish technical working groups on areas of mutual U.S.-Caribbean trade expansion interest.

This paper was published with the support of the Heinrich Böll Foundation, Washington D.C.