Several Guyanese in USA and Guyana asked me for a perspective on the newly announced tariff (38%) by the American President on April 3 on imports from Guyana – they want to know the fallout on the Guyanese economy.
A tariff is a kind of a sanction against Guyana for ‘unfair trading’ practices, as defined by the USA President. Tariffs create uncertainty in the market and by extension in the economy of both countries. There is a ripple effect on the economy in the import as well as exporting country.
Tariff is a tax on imports that result in higher prices – done as a form of trade retaliation to bring about equal trade terms; to discourage imports; to raise revenues especially for poor countries; to protect local industries from foreign competition; to redistribute money from consumers towards local producers; among other reasons. Tariff is generally borne by consumers in the importing country rather than importers (wholesalers and retailers or businesses) or the producers of the exporting country. The tariff, according to various studies, is generally passed on to consumers. That is one way of having rising prices of a good.
American total imports from Guyana are negligible (leaving out oil which has not been tariffed) in terms of overall American imports, with a few items valued at a few million dollars, and, therefore, tariffs would have almost nil effect on USA (among American consumers most of who are Guyanese Americans) but major effect on Guyana in terms of exports and the overall economy. Tariffs generally result in higher prices of goods, and as such, will likely result in reduced American demand and purchase (and by extension lower imports) which will significantly impact Guyana. Guyanese businesses will earn less revenues, negatively impacting government taxes, and jobs would be on the line. American businesses that import from Guyana will also be affected – tariff may lead to less American imports, less revenues, less taxes for the treasury, and probably loss of jobs. World trade data suggests that Guyanese exports to USA account for some 23% of Guyana’s GDP. Guyana has the largest export and import in dollar value to/from America. Guyanese imports from USA will not be affected because Guyana has not retaliated with higher tariffs. And with the economy rapidly growing, imports will increase for industries and consumption. GDP will be affected by lower exports but may be balanced off with increased imports.
At any rate, American tariff would significantly affect the Guyanese economy – revenues, GDP, jobs, etc. But with American imports from Guyana so small, and depending on the products imported, the President Trump tariff itself may not affect American demand for Guyanese goods, and as such Guyana could escape with little fall out in exports and imperceptible effect on GDP. Guyana has to monitor any fallout.
Guyana can’t afford to ignore the Trump tariff and has to find a way to negotiate to bring it down if not to eliminate it. Every country is worse off with tariffs as they reduce demand for foreign goods. That can create political challenges for our country and make it difficult to build on relations with America. Guyana should try to find a way to address the tariff issue through negotiation and treaty with USA. One suggestion offered by a group of Guyanese Americans is for a friendship treaty with USA or a linkage (to be negotiated in the form of a territory) with America that automatically deter (or prevent) any kind of tariffs by Guyana on American products and vice versa. (Such a treaty could also lead to American protection of Guyana from Venezuelan threats). When tariffs are removed from American imports in Guyana, goods are cheaper; people can afford to have a better lifestyle with the same amount of money they currently earn. So Guyana can also consider reducing tariffs on imports which would lead to an elimination or reduction of American tariffs.
