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  • 3 months ago
As US President Donald Trump began yesterday imposing higher import taxes on dozens of countries. The economic fallout analysts say has started to damage the US economy.

Goods from more than 60 countries became subject to tariff rates of over 10% for T&T it is 15 Percent.

Prime Minister Kamla Persad Bissessar on Thursday said her government is moving to negotiate their way out of this.

Joining us to break it down further is economist Dr Vaalmikki Arjoon.
Transcript
00:00As U.S. President Donald Trump began yesterday imposing higher import taxes on dozens of countries,
00:06the economic fallout analysts say has started to damage the U.S. economy.
00:11Goods from more than 60 countries became subject to tariff rates of over 10%.
00:17For T&T, it's 15%.
00:20Prime Minister Kamala Prasad-Basasa yesterday said her government is moving to negotiate their way out of this.
00:26Let's remind you of what she said.
00:27We have three options. We are following all three options.
00:32One is, of course, to engage in conversations with our friends from the United States.
00:37The second, and we've already begun, is looking for alternative markets.
00:41We can export.
00:42I think the products that we most hit will be our ammonia and methanol products, energy products.
00:49But then our competitors have also been hit with tariffs.
00:51So if it reduces our competitiveness, theirs is also reduced.
00:57So we have good friends in the North, in the U.S., and we'll continue to speak with them.
01:01Well, joining us to further dissect this matter is economist Dr. Valmiki Arjun.
01:08Dr. Arjun, thank you so much for joining us.
01:11Hi, good evening, Urvashi, and thank you for having me.
01:14So, Dr. Arjun, let's start off by asking you, what is the reasoning behind this move?
01:20Is it to simply propel the U.S.'s manufacturing power?
01:25Well, that is essentially the main signal that the U.S. president has been providing all along
01:33since he started talking about raising these tariffs.
01:36In fact, what he signaled is that there has been a trade deficit in the United States for quite some time now.
01:44So, for example, when we look at our data with the United States, the U.S. is our largest trading partner.
01:50But in 2024, we would have incurred a trade surplus with the U.S., which means from the U.S. point of view,
01:58they would have incurred a deficit in trading with us.
02:01And looking at the data, that deficit is about $421.7 million.
02:06We are not the only country that the U.S. incurs a deficit with.
02:09With numerous other economies, the U.S. tends to import more than what the export is due to the monetary values.
02:18So, what he has signaled is essentially that he wants to revert it.
02:24He wants U.S. exports, the value of U.S. exports to be more than U.S. imports.
02:30And in addition to that, to be able to collect more revenues for the United States from the tariff that is levied on imports,
02:40because the tariff is a tax.
02:42So, essentially, he has more tax revenues on imports as well,
02:46which, of course, increased revenues is going to help with whatever expenditure obligations his government would have going forward.
02:54But this comes at a serious risk of shrinking the entire U.S. economy overall,
02:59especially in the short term, whenever the tariffs take effect.
03:03Because remember, it's not just tariffs on one or a few particular economies.
03:09It's tariffs on many economies internationally.
03:13So, it's a slew of new tariffs that will ultimately increase the prices in the United States.
03:19And that will directly impact them, first of all, because higher prices means that households in the United States,
03:29businesses, et cetera, the cost of living, the cost of doing business, are going to essentially go up.
03:37And for other countries that import from them, like us, their largest trading partner,
03:41it's going to directly impact us because it raises the cost of imports from our U.S. suppliers.
03:50So, the elevated import prices will result in temporary imported inflation
03:55because local importers will pass on the increased costs to consumers.
04:01So, you have, on one hand, prices going up in the United States because of the tariffs,
04:06which means that the demand, the purchases of goods that they import will contract, will reduce.
04:13And then, on the other hand, as well, in the same vein, because of these said imports,
04:18prices in the U.S. are going to go up, which means what we import from them,
04:22we end up paying the said high prices when we go up, when we import from them.
04:26And it's not, it doesn't just stop there.
04:28Remember, when we import, we're paying duties and vats charged on these imports.
04:33And this is charged on the cost, insurance, and freight.
04:38So, when the cost of these items go up in the United States,
04:41it means that the vat we have to pay, the duties we have to pay when we import also goes up as well.
04:46So, we'll be temporarily importing inflation.
04:48So, Dr. Arjun, when we talk about our exports to the United States,
04:53what products specifically are we talking about?
04:55I know the Prime Minister did make reference to ammonia.
04:57Sure.
04:58So, about 90% to 95% of our exports really comprise the energy-based commodities.
05:06So, you'll find that once the list that they provided in April earlier this year,
05:12March, April earlier this year, where they indicated a list of tariff-exempt commodities,
05:20there's been no announcement as to whether that list is defunct or not.
05:25So, I would assume that that list is still valid.
05:29Certain products are likely to continue to be tariff-exempt.
05:32And that would be items like crude oil, like liquefied natural gas, fertilizers, for example.
05:39But other energy commodities, like methanol, like ammonia, as the Prime Minister rightly said,
05:45they are likely to incur the new tariff, the 15% tariff.
05:49And that will make these commodities more expensive for the U.S. importers.
05:55Right.
05:56And that gives a risk of lowering the export volumes of these items from TNT into the United States
06:06because of the higher price.
06:08Now, we could consider this now from two angles.
06:10So, the United States, especially more so now that they're looking to ramp up manufacturing activities,
06:17they're very energy-intensive in terms of how much they consume, right?
06:22So, their demand for these energy commodities are very high.
06:25So, it could very well be a situation that, despite the 15% increase because of the tariff
06:34in these energy commodities, the emethanol, ammonia, et cetera,
06:38the demand for these commodities will drop, but they may not necessarily drop significantly
06:44because the demand for these commodities are still going to be very high.
06:48So, Dr. Arjun, we're running just a little bit short on time.
06:54So, if you would allow me to ask, do you expect these measures proposed by the Prime Minister
07:00to bear any tangible fruit?
07:04Right.
07:05So, first of all, we also, with respect to the energy commodities,
07:09we also have to bear in mind that certain countries like Canada,
07:12the tax on some of the energy commodities, like you said, ammonia,
07:17is not as high as it is for us, that 15%.
07:21My understanding is that it's lower.
07:24So, it also begs the question, okay, if the demand is going to be so intensive for these commodities,
07:30would they just switch to another country like Canada where the tax is not going to be so high?
07:36So, that is a risk that we're also facing.
07:38Yes, the demand for the energy commodities are likely to continue to be high,
07:42but would the U.S. find a lower cost?
07:45Another market, essentially.
07:47Right.
07:47Like Canada.
07:48Now, coming to your question, what the Prime Minister indicated is quite pragmatic and quite correct.
07:55In having to look for solutions, what they may end up very well doing is looking, first of all,
08:03engaging in negotiations with the U.S. officials, aiming to secure tariff reductions on key exports,
08:11like the energy commodities, like the chemicals, also that we manufacture,
08:15other manufactured products, other processed foods, etc.
08:19What they may have to do is look at offering reciprocal preferential market access to selected U.S. products
08:26through things like lower import duties, and also going out of the realm of taxation,
08:33we're looking at streamlining regulatory approvals for U.S.-based commodities
08:37that makes it easier for us to import U.S.-based commodities.
08:41All of these things could facilitate favorable outcomes,
08:45and what they should also look at doing is leveraging the diplomatic frameworks,
08:49like CARICOM, like the Caribbean Basin Initiative,
08:53that those entities could help to further support these negotiations.
08:58But what they also have to do, and the Prime Minister did indicate this as well,
09:01diversify their trade relations with other countries.
09:04Yes.
09:04So it reduces reliance on the U.S. market.
09:06On the U.S. alone, gotcha.
09:07So we do essentially have to look for other markets.
09:10Yeah, quite naturally so.
09:13But what we also can consider doing from a fiscal standpoint,
09:16once of course we can afford to, is those export companies,
09:21including not just the large ones, but the medium-sized ones as well and the smaller ones,
09:25look at fiscal relief if and when their revenues drop,
09:29because their exports would drop as well.
09:32Things like tax relief, export credits, rebates,
09:36to help them reduce the overall production costs.
09:39If and when they are severely impacted by the tariff.
09:42One thing to remember, though, and this is quite important,
09:45and it's a silver lining, our tariff is 15%.
09:48Yes.
09:49Other countries, like Brazil, is 58%.
09:51Yes.
09:52India is 50%.
09:53There's 39% on Swiss goods, 100% on computer chips.
09:58So we are not in that much of a bad place.
10:01As we close, Dr. Arjun, I do have to ask you,
10:05the story we ran before Chief Secretary Folly Augustine,
10:08he predicted and suspected that prices of goods in Tobago will increase.
10:13Is this a fair assessment, and how does the U.S. tariff impact Tobago goods?
10:21Right.
10:21So it comes back to what I was saying earlier.
10:24There's a slew of tariffs on most countries internationally, if not all.
10:29Prices in the United States are going to go up,
10:31and given that we import quite significantly from the U.S.,
10:35our largest trading partner, in fact, just last year,
10:39we would have imported, I believe the figure was about three,
10:45yeah, we would have imported about quite $9.4 billion U.S. worth of goods
10:51from the United States alone, right?
10:54And that's just the United States.
10:55And given that we import quite significantly from the U.S.,
10:59it means that when prices there go up, because we're tariffs,
11:03when we import from our U.S. suppliers,
11:06we are going to be paying higher prices and higher duties on VAT
11:09when we import from them.
11:10Naturally, that is going to be passed on to the local consumer,
11:14on the supermarket shelves, in the shopping malls, etc.
11:17So quite naturally, prices in both Trinidad and Tobago
11:21are likely to go up in the short term
11:23because of the overall state of the tariffs in the United States.
11:26Unless, of course, there can be successful negotiations
11:29where the tariffs might not necessarily be so high
11:33or in the future, they may just drop it altogether.
11:36Now, Dr. Arjun, I do have to thank you so much for sharing with us.
11:40You did, in fact, clear the air.
11:42You did provide a silver lining and so on.
11:44And I know that you're at an event.
11:45So please extend our apologies to your guests
11:48and thank them for, you know, excusing you
11:50and sharing your time and expertise with us.
11:52Sure, not a problem. Take care.
11:56Thank you again. Have a good night.
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