WASHINGTON, D.C. — THE Caribbean could face a marked economic slowdown if the global trade war and rising tariffs continue, according to senior officials at the International Monetary Fund (IMF). While the extent of the fallout varies across countries, the overall outlook points to growing challenges for the region.
Nigel Clarke, Deputy Managing Director of the IMF, shared these insights at the Caribbean Development Bank’s (CDB) Board of Governors Meeting held in Brazil this week. He highlighted findings from the IMF’s World Economic Outlook, which was last presented during its Annual Spring Meetings in April.
According to Clarke, global economic growth has already been revised downward — from an earlier forecast of 3.3 percent to 2.8 percent this year — largely due to escalating tariffs. A further decline of 0.3 percentage points is projected for 2026.
"...we know that uncertainty imposes huge costs. With complex modern supply chains and changing bilateral tariff rates, planning becomes very difficult. Businesses postpone shipping and investment decisions. We also know that the longer uncertainty persists, the larger the costs imposed," Clarke said.
Clarke emphasized that tariffs, while they may raise fiscal revenue in the short term, often do so at a high cost: " Tariffs do raise fiscal revenues but come at the expense of reducing and shifting economic activity—and evidence from past episodes suggests higher tariff rates are not paid by trading partners alone. These costs are passed on to importers and, ultimately, to consumers who pay higher prices.”
Despite the regional challenges, Guyana as a notable exception. The country's booming oil and gas sector is helping to insulate it from some of the headwinds affecting its neighbors.
Overall, however, the Caribbean is expected to experience only modest economic growth—even before factoring in the latest U.S. trade policy measures. While some countries such as Jamaica and Trinidad & Tobago have shown stronger performance, that progress is offset by weaker growth in other parts of the region.
Clarke also highlighted the role of domestic challenges in dragging down growth. “In several countries, crime continues to weigh heavily on the economy,” he noted. “In Haiti, the deteriorating security situation undermines efforts to implement reforms, attract foreign investment, and sustain economic activity.”
Tourism and Commodities Under Pressure
The IMF estimates that the tariffs announced in April — and the ripple effects they create globally — could reduce regional growth by at least 0.2 percentage points on average. But the impact won’t be uniform.
In tourism-driven economies, where growth is closely tied to the strength of U.S. consumer demand, the effects will depend on how much of the visitor base comes from the United States.
For oil-exporting nations, the issue lies more with declining global demand and price volatility.
Clarke stressed that no nation — regardless of size or economic structure — is immune to the effects of shifting trade policies and market reactions.
He also warned of rising volatility in global financial markets, pointing to the sharp declines in equity valuations and erratic movements in U.S. bond and currency markets following the April tariff announcements.
