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The Daniel Ortega and Rosario Murillo regime announced, through Ministerial Agreement 005-2026, the elimination of the tariffs Nicaragua had imposed on imports from China under the free trade agreement between the two countries. The agreement does not specify whether China will grant Nicaragua the same terms in return.
Predictably, that decision will further widen the trade gap between the two nations, economists say. Likewise, it will represent an even greater challenge for Nicaraguan commerce and small industry, which for several years has complained about the invasion of Chinese stores and businesses that have set up in cities across the country. The main argument is that these newcomers compete unfairly because they receive tariff advantages from the regime.
The Free Trade Agreement between the two countries includes two tariff schedules that together account for nearly 1,500 of the agreement’s 1,768 pages published in La Gaceta. These schedules determine the tariffs Nicaraguan goods must pay when entering Chinese territory, as well as the duties imposed on Chinese products entering Nicaragua.
With the entry into force of the new agreement, the tariff was reduced to zero for Chinese products arriving in Nicaragua. “It is natural for a free trade agreement to eventually reduce reciprocal tariffs to zero,” an economist consulted by CONFIDENCIAL said. That is true, although countries normally negotiate tariff reduction periods lasting several years in order to protect sensitive national sectors.
The question here is when China will issue an identical measure benefiting Nicaraguan products.
Section 2 of Article 2.4 of the Free Trade Agreement states that “an agreement by the parties to accelerate the reduction and elimination of customs duties on originating goods shall replace any tariff rate determined in accordance with their schedules for such goods and shall enter into force upon approval by each party in accordance with their respective applicable legal procedures.”
Additionally, Section 3 stipulates that “a party may at any time unilaterally accelerate the reduction and elimination of customs duties on originating goods of the other party.” In this case, it is sufficient for that party to notify the other of the decision it has taken, as the regime has just done.
Trade Gap Will Continue Growing
For decades, Nicaragua has turned to Chinese factories to acquire a multitude of low-value merchandise, causing the label “Made in China” to become synonymous with cheap, low-quality goods. Data from recent years show not only an impressive growth in exports from that country to Nicaragua, but also how the trade gap has widened year after year.
In 2023, the year the trade agreement between the two countries entered into force, Nicaragua exported goods to China valued at 14.2 million dollars. In two years, that figure rose to 81.1 million, marking growth of 571%. Although the figure included in the Foreign Trade Report for the fourth quarter of 2025 shows extraordinary dynamism in just two years, it cannot compare to the enormous bill for what Nicaragua purchases from China.
That bill stood at 1.228 billion dollars in 2023 and rose to 1.892.9 billion in 2025. Although the percentage increase was only 54.1% (ten times less than that of Nicaraguan exports), there are three facts that help explain what really lies behind such a huge disparity.
The first is that the 571% growth in exports from Nicaragua, rather than reflecting exponential growth, actually reveals the tiny starting point: 14.2 million dollars. The increase amounted to 66.9 million. In parallel, exports from China grew by 664.6 million dollars—almost ten times more than the growth shown by Nicaraguan exports to China.
The result of all these figures is an unstoppable increase in the trade gap between the two nations: while the difference in trade exchange was 1.214.1 billion dollars (in China’s favor) in 2023, that figure grew to 1.811.8 billion dollars in 2025, always favoring the Asian nation.
Another way to look at it is that, while by the third quarter of 2025 the difference in trade volumes was 19 to 1, by the end of the year it had climbed to 23.3 to 1.
During the same period, the United States remained the country’s main supplier of goods, although growth was little more than anecdotal: 0.64%. In contrast, the trade gap between the United States and Nicaragua did narrow and even reversed. Whereas in 2023 it was 413.4 million dollars in favor of the United States, by 2025 the balance had shifted to 9.5 million dollars in favor of Nicaragua.
This decision by the dictatorship expands the advantages the country provides to China in an almost unilateral manner. The main triad consists of burdensome loans, advantageous infrastructure construction contracts, and now this reduction of tariffs to zero.
