Tariff in effect, but Hill not giving up on exemption yet

Consumers of Jamaican exports to the United States (US) can now expect to face increased prices as the 10 per cent tariff imposed by President Donald Trump on all countries has taken effect for the Caribbean nation.

Jamaica was hoping to escape the 10 per cent tariff as 90 per cent of the island’s exports to the US are covered under the Caribbean Basin Initiative (CBI). However, it has been determined that the 10 per cent tariff supersedes the CBI regulations.

That’s according to Senator Aubyn Hill, minister of industry, investment and commerce.

Jamaica’s main exports to the US include bauxite and agriculture and the majority are covered under the CBI.

“We continue to have conversation with the US administration as the tariff question is not completely settled but, as of now, all Jamaican exports to the US will be subject to the newly imposed 10 per cent tariffs, as it supersedes the CBI regulations,” Hill told The Gleaner.

The CBI, comprising the 1983-1990 Caribbean Basin Economic Recovery Act and the 2000 Caribbean Basin Trade Partnership Act, allowed Jamaica to export nearly all products to the US duty-free.

Yesterday, Derrick Reckord, president and chief executive officer of GraceKennedy Foods US, told The Gleaner that as of last week, GraceKennedy had already begun paying the tariff on exports from Jamaica into the US.

He said there would be some increases in prices, but, where possible, efforts are being made to mitigate the increases to prevent them from being as high as they could have been.

He also said that because there are some products already in the system, the effect of the tariff will not be immediately felt.

Reckord told The Gleaner that Grace products out of Canada into the US will not immediately attract increased tariffs, as these tariffs have been suspended for the time being.

“Where we have products coming out of Brazil and other countries, the 10 per cent tariff will be added to the price of the imports,” he said.

Reckord said his company was looking to keep prices down, but consumers will see price adjustment.

He said that with the continued changes in how trade is now being conducted around the world, there remains a level of uncertainty which companies have to manage as they go forward.

“What is happening today could change tomorrow, so we have to keep on top of the changing trade environment,” he said.

Reduced prices

John Mafood, head of Jamaican Teas, manufacturers of Caribbean Dream teas, told The Gleaner that his company was also already paying the tariff on its exports to the US.

He said his company has reduced the cost of its products to the US importer for the next two months to hold prices at current levels to the consumer. But, he said, if the Government is unable to convince the US administration to withdraw the 10 per cent tariff, his company would have no choice but to increase costs to the US importers, which will in turn increase costs to US consumers.

“Most of our consumers in the United States are people at the lower end of the economic scale, and if we have to increase prices it will impact them negatively,” he said.

Mahfood, who is a past president of the Jamaica Manufacturers and Exporters Association (JMEA), said that Jamaica has a trade imbalance with the US in favour of its North American neighbour and as such, the imposition of the tariff was unfair.

“The tariff is also not protecting US manufacturers, as there is no manufacturing in the US of the products that we export,” he said.

Mahfood said that if the tariff remains in place it will hurt the Jamaican consumer, the Jamaican economy, and Jamaican exporters.

“If sales to the United States decline, then companies will see reduced profits and they will have to look at reducing costs or seek markets elsewhere,” he said.

In the meantime, Sydney Thwaites, the current president of the JMEA, told The Gleaner that with the increased tariffs on Jamaican exports to the US, the situation provides a good opportunity for Jamaican exporters to seek to develop new markets.

However, he expressed the hope that with the realignment of trade partnerships, this would not lead to a disruption in the supply chain.

Thwaites said that while he had heard anecdotal stories, he could not say if and how many exporters are lowering their prices to hold prices at current levels for US consumers.

He said he did not know how feasible it was for Jamaican exporters to drop their prices charged to US buyers to accommodate the new tariff.

“It will take some time to clarify the situation, so, in the meantime, we need to see how we can continue to partner with the United States in the new alignment,” he said.

Thwaites added that he believed that despite the challenges that come with the tariffs, there are opportunities that will open up to the Jamaican exporter due to the country’s location.

Speaking with The Gleaner last week, local exporters expressed unease about the tariffs.

Rita Hilton, CEO of Carita Jamaica Limited, said she had worked out an agreement with her main buyer, where the buyer would absorb five per cent of the tariff while Hilton would absorb the other five per cent, in an effort to maintain consumer prices for her goods.

Carita Jamaica Limited exports agricultural products, including thyme and Scotch bonnet peppers to the US market.

Hilton acknowledged, however, that consumers might still see price increases once the products land in the US as a result of other variables.

editorial@gleanerjm.com