Be prepared for more increases in prices

Introduction

The Donald Trump Administration imposed tariffs on countries exporting goods to the USA will impact all of us. The rate is 10% for most countries but tariffs on Chinese goods can be as high as 125%

Although we don’t export much, tariffs will still affect us because we import almost everything and those countries that we import from will be impacted by the tariffs, therefore we can expect the prices of goods to increase further increasing our cost of living.

What is a tariff?

A tariff is a tax that is imposed on the goods that are imported from a country.  A tariff is like the duties paid to the Turks and Caicos Islands Government for importing goods.

The purpose of tariffs

A tariff is one means by which a country generates revenue. In the Turks and Caicos Islands, the Government charges a processing fee along with the duties, In the 2024/2025 budget, it is estimated that the import duties will result in revenues of $112,459,732 representing 24.2% of recurrent revenue. The other custom duties which I think are the administration after is estimated to generate revenues of $38,762,718 representing 8.3% of the recurrent revenue.

While the tariff is a way to bring additional revenue, the main reason Trump has introduced the tariff is to protect the US domestic industry. Trump believes that the tariffs will encourage the use of more US products being made locally because the tariffs will make the imported goods more expensive.

The impact of tariffs

We should not take the tariffs for granted. Tariffs will raise prices, and some merchants might use them as an excuse to increase their prices, even if they have stocked goods beforehand. Why will tariffs raise prices?  Tariffs are essentially taxes, and when added to goods, merchants raise prices to cover these costs.

Many of us also purchased goods from China that comes through the USA to Turks and Caicos and so those goods will be charged a significant tariff.

We frequently visit the USA for shopping. If US merchants import goods, it will likely raise consumer prices.

If tariffs lead to higher prices for goods, it can affect the tourism market as tourists will have less disposable income. If goods are no longer affordable, they will have to prioritize as to whether to make the Turks and Caicos their vacation destination, a place that is already relatively expensive.

In 2023, the Turks and Caicos exported $21.7million of goods, of which $5.1million were exported to the US. When the goods are subject to the 10% tariff imposed on Turks and Caicos, this can impact and reduce the demand of these goods thus impacting the profitability of TCI exporters.

What can we do?

We are also highly dependent on the US, not only for products but for tourism. It is time we truly explore alternatives.

I recently visited Sky Poultry, owned by Mr. Sean Penn. This business has great potential to supply our eggs and chicken. To succeed, our government must review tariffs on meats and eggs to support local businesses. We must encourage more local production.

We also need to see how we can import goods directly from China rather than having the US as a stopover. This may already be happening, but it is unknown to me. However, if it is not, this is something that we really need to explore immediately to avoid the 125% import tax that US is imposing on China.

We also need to explore trading directly with Countries in the Caribbean Region and South America and have vessels coming directly to Turks and Caicos rather than going through the USA.

Conclusion

I understand exactly what Trump is trying to do but Trump should know that other countries would retaliate by imposing tariffs on US products. I am not sure that is the answer because it will create a trade war. However, what I do know is we need collaboration and engagement among the Caribbean Region.

Furthermore, our government needs to review our tariff structure. Do we continue using duties as a means for revenue? Do we replace it with something else.

I will conclude this article by thanking the Government for permanently making the processing fee 5% and for reducing the fuel tax to 64 cents per gallon. Of course, these measures have been in place now for a while on a temporary basis. However, consumers continue to face high increases in prices and will continue to do so with the implementation of the US tariffs.