4 de April 2025
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The imposition of an 18% tariff on Nicaraguan exports to the US market will affect employment in the country. It could also push national and foreign investors based in Nicaragua to seek destinations that are less punished by the measure of US President Donald Trump.
On Wednesday, April 2, the U.S. president imposed tariffs on exports from more than a hundred countries, generating a trade earthquake whose consequences are still too early to calculate. The White House reasons that this move can balance the trade deficit with these countries by raising the costs that their products have to pay to enter the United States.
The regime’s response was notoriously calm. In her customary midday monologue, Rosario Murillo, Daniel Ortega’s wife, pointed out that “we have heard the decisions and announcements, and like all governments around the world, we have convened our economic teams to analyze their scope.” She promised that the results of these analyses will be “shared with the different productive and exporting sectors of our country”.
The fact that all Central American countries suffered the retaliation ordered by President Trump, “sends a powerful message: not even partners with free trade agreements are exempt from being evaluated under this new logic of trade power,” argues professor and researcher at the University of Costa Rica, Jhon Fonseca.
He adds that “in this new reality, although DR-CAFTA is still in force, the announcement implies a unilateral reinterpretation of the balance reached in that negotiation”. Hence, Central Americans face a real threat of erosion of their preferential access, which has been key to attracting foreign investment and generating employment, he explained.
Tariffs do not violate CAFTA
The economist and former Vice Minister of Finance, Juan Sebastián Chamorro, does not see discrepancies between the text of the trade agreement and the decision of the US President. The reason is that it is the Executive’s power to impose tariffs, arguing elements of national security, as established in the Trade Law of that country, he explained.
While a 10% tariff was imposed on all of Central America – and many countries on the continent – the charge applied to Nicaragua is much higher: 18%. This offers an automatic advantage to the neighbors of the isthmus, whose products will have to pay a lower tariff to reach the U.S. consumer. It is foreseeable to believe that this consumer will prefer to buy a Honduran or Salvadoran article that will arrive with a 10% tax, than a Nicaraguan one for which he will have to pay 18% more.
“The case of Nicaragua is very particular, since it is the country in the region with the highest reciprocal tariff. Therefore, the loss of relative competitiveness, which for Costa Rica is a risk, for Nicaragua is a reality for its Central American peers (with whom it competes for investment and market), but also with the rest of the world”, explained the Costa Rican academic.
The alternatives for the private sector are very few, says Chamorro, interviewed for the program Esta Semana, which is broadcast online as a way to break the journalistic censorship of the regime headed by Daniel Ortega and Rosario Murillo. Among the few options, he mentions “looking for other markets for their export products; trying to improve efficiencies, and be competitive”. Even starting with a disadvantage of eight percentage points, with respect to its closest competitors.
“This will alter the relationship of Nicaraguan exporters with their buyers in the United States,” warns Chamorro. His thesis is that the U.S. importer will prefer a product that pays a substantially lower tax than one made in Nicaragua. He will choose the one that is cheaper, because “it is not about helping anyone, but about doing business. This tax affects the competitiveness of the country’s productive and export sector,” he said.
Nicaragua loses competitiveness
Workers, producers and exporters in every major industry are wondering whether they will be affected by this wave of new taxes, hoping to have some certainty that will allow them to plan for the future. As they come to their own conclusions, economist Chamorro points out a simple truth: “The executive order [from President Trump] makes no differentiation.”
From there, he warns that “it would seem that we are talking about a generalized tariff on all export products”. Likewise, he also points out that the impact on each sector will be conditioned by the cost structure of each of those sectors. “It is not that because an 18% tariff was imposed, exports will disappear, but they will be reduced”, he points out.
That will depend on how competitive Nicaragua was before this new tax and how competitive it continues to be after this 18%. That is where the importance of the differentiated tariff for Nicaragua with the rest of Central America stands out, because that puts Nicaragua in a situation of lower competitiveness, with respect to the rest of the countries in the region,” he says.
A Guatemalan economist who agreed to speak on condition of anonymity explains that it is too early to determine which sectors will be affected, and how much, but not for lack of effort. Since Wednesday, he and his colleagues working for both private and public institutions have had intense exchanges trying to determine how the countries of the region will be affected.
Chamorro admits that one possible consequence is the closure of companies, and their relocation to other territories, if the numbers indicate that those additional eight percentage points significantly reduce the competitiveness that Nicaragua had. If that is so, “these companies will leave because it will be more profitable to produce in the Dominican Republic or Honduras, and export with a 10% surcharge, versus 18%”, he illustrated.
The former public official does not believe that this represents a significant change in the fate of Nicaragua’s trade relations with the world. “The United States will continue to be Nicaragua’s main trading partner for years to come, for the same historical, geographic and cultural reasons for which it has been the main partner during the last decade”, he assures confidently.
He knows that trade relations “do not adjust overnight, and it is not certain that China is now going to become the main trading partner. We are too far away for that to be a remote possibility. Despite this blow, the United States will remain the main partner – as will Central America – as well as the main remittance sender,” he says.
China -which is more of an exporter than an importer- may well acquire the raw materials that Nicaragua sells in the surrounding countries, saving a lot of time and money in the process. What the expert does predict is that the invasion of Chinese products and traders that compete unfairly against the small Nicaraguan businessman will continue, as well as the substitution of imports from other countries, to continue favoring China.
The ‘Ortega Murillo factor’
The analysis of the possible consequences of this imposition of new tariffs would be very different if all Central American countries had been taxed at the same 10%, because they would all be starting from the same base. The fact that Nicaragua received discriminatory treatment, in which its products will only be able to enter the U.S. market after paying 18% taxes, imposes substantial changes in the equation.
The question is why 18% and not 10%, like everyone else?
According to Professor Fonseca, “the short answer is that there are no elements to affirm or reject that there is a political reason behind these higher tariffs. The fact that the criteria for defining reciprocal tariffs are based not only on quantitative elements, but also on qualitative ones, makes it very difficult to transfer subjectivity to measurement”.
He explains that it is very common for countries to implement non-tariff measures as barriers to trade. “Although it is common knowledge, it has always been something that countries have dealt with, and it seems that the United States is no longer willing to do that. Central American tariffs on U.S. products are quite low, but they are not relying solely on tariff criteria to define reciprocity, and non-tariffs still have a significant margin of subjectivity,” he said.
From his dual role as economist and political referent, Juan Sebastián Chamorro outlines a thesis that he cannot prove, because neither Trump nor anyone on his team has detailed their reasons for imposing higher tariffs on Nicaragua. However, that does not prevent him from concluding that those eight percentage points more are due to the “Ortega – Murillo factor”.
“Whoever says the impact will be a loss of so much percent is perhaps using a crystal ball,” he assures with irony.
Ortega continues to challenge the United States
He explains that there is certainty that the effect of the tariffs will be negative for the Nicaraguan economy. “I argue this as an economist, by the fact that they are dictating to Nicaragua the ‘Ortega Murillo factor’, of eight percentage points, over the rest of Central America.”
While that percentage difference does not take Nicaragua out of the game on a continental scale, it is losing it by looking only at Central America. “Many of their products are similar to those of Honduras, El Salvador, to those of Guatemala,” but those of Nicaragua will arrive with a higher price at the borders of the United States. “What I see is that they took the Nicaraguans out of the game, so that Central Americans are the ones who occupy the position, in the face of a higher price increase of what you produce,” he explained.
Chamorro notes that the region has more or less homogeneous tariffs, as corresponds to its reality of Cafta partners. “I attribute this differentiated tariff (of 18%) to Ortega’s actions against the United States, particularly the migratory policy that has had great resonance in US foreign policy, by using the Managua airport to transfer thousands of people from all over the world to the United States. This did not go unnoticed, and therefore we should not be surprised to see tariffs of this type”, he said.
Additionally, the regime flirts with the main enemies of the United States: it invited the Iranian Mohsen Rezai to Ortega’s inauguration in January 2022. It offered a large part of the territory to a Chinese businessman and gave him permission to build an inter-oceanic canal, and keeps open the options for the visit of Russian soldiers to the country, beyond the fact that there is already a Russian espionage center installed in Managua.
If the motivation is political, as Chamorro argues, “nothing makes us think that this discussion is over, because additional taxes could be added to the 18%, a decision associated more with the specific issue of national security, caused by the generalized migration from all parts of the world provoked by Ortega and Murillo”.
