By FAY SIMMONS

and NEIL HARTNELL

Tribune Business Reporters

The Central Bank’s governor yesterday warned that Donald Trump’s tariff hikes could hurt Bahamian tourism by undermining travel demand in this nation’s key source markets through higher living costs.

John Rolle, speaking during the Central Bank’s economic briefing for the 2024 fourth quarter, said full implementation of the new US president’s tariff policy could spark increased inflation by raising the cost of imported goods. This, in turn, would negatively impact the spending power of many US households who account for more than 90 percent of this nation’s visitor base.

While Mr Trump yesterday pulled back from the brink of igniting a trade war with both Canada and Mexico, postponing the imposition of 25 percent tariffs on all imports from both countries after they pledged to beef up border security and crack down on the flow of illegal migrants and narcotics into the US, the 10 percent levy on all Chinese goods is still due to take effect today.

And, while the US government’s threatened levying of hiked taxes on imported goods from other states has been delayed, it has not gone away and could be broadened to target other countries including European Union (EU) members. The Bahamas will not escape the impact on Chinese-made imports, in particular, because many transit the US before coming to this nation.

“Uncertainties persist around unrest in the Middle East and the war in Ukraine. In addition, the escalation of global trade tensions could lead to higher inflation and slow further interest rate reductions in the major economies,” said Mr Rolle, as he pledged the Central Bank to maintaining the one:one exchange rate peg with the US dollar.

“Any consequential slowdown in the North American economies, or negative impacts on US household purchasing power, would also limit near-term gains in tourism - whether in terms of growth in arrivals or in terms of the industry’s ability to preserve pricing gains in accommodation. 

“The Central Bank will therefore continue to monitor trends and pursue the appropriate policy to safeguard financial stability and the value of the Bahamian dollar.” Mr Rolle explained that due to the large volume of goods imported by The Bahamas, any policies adopted by the US, its closest and largest trading partner, which drive up the cost of goods and slow down economic activity will inevitably hit this nation.

“From all of the analysis that has been done, the impact could be increased inflation, so The Bahamas could feel some of that because we are primarily an importer of finished goods. So, to the extent that we import any goods and services through the US, we could see some impact. The tariff outcomes are also expected to cause some slowing down in economic activities in these various economies,” said Mr Rolle.

He added that the Bahamian tourism industry could also feel the negative impact as it grapples with a shortage of rooms that is able to meet stopover visitor demand. The Central Bank governor suggested countering this by increasing marketing and adjusting the pricing of rooms and activities.

“And again, tourism is driven by the relative strength of those international economies. So, it should be expected that it’s going to increase the challenges around marketing and attracting visitors to The Bahamas,” said Mr Rolle.

“I’m saying that though mindful of the fact that we’re still in an environment where we’re really up against a cap on capacity, to some extent, in the stopover segment. And so, the opportunities could be there for The Bahamas to offset some of those negative influences by just the marketing and other efforts.

“But, in any event, the environment does soften the prospects around how you go about pricing your rooms and others attractions for visitors. Mr Rolle said the Bahamian economy is still forecast to enjoy positive growth in 2025, although Mr Trump’s threatened tariffs and trade wars could slash the pace and extent of expansion.

“More work is needed, but what I anticipate is that the outlook is still for growth in 2025. It’s just a question now of the extent to which it will differ from what we previously expected,” Mr Rolle said. Bahamian merchants, meanwhile, said it was too early to panic over the potential for inflation and price increases as a result of US tariff policies.

Brent Burrows II, CBS Bahamas’ vice-president of retail and sales, told Tribune Business, though, that Mr Trump’s strategy is almost bound to cause “ill effects on the Bahamas” if fully implemented. However, the precise nature and extent of any impact will depend on multiple variables, including the severity of US actions and other countries’ retaliation; how many products are targeted by tariffs; and how long this will last.

Should the fall-out be both prolonged and severe, Mr Burrows suggested the Government may have to at least try and partially offset the impact for both Bahamian businesses and consumers by “loosening up” on taxes and “processes” to both improve the cost and ease of doing business.

“I think it’s just something we need to watch carefully,” he said. “At least for us, it’s a bit too early to say how it will affect us if it comes into play. It’s something to pay attention to; there’s potential for it to have ill-effects on The Bahamas. It depends on the severity and how it works. It’s just too early to tell but pay careful attention.”

Mr Burrows added that CBS had yet to receive any communication from its suppliers about any potential tariff-related fall-out and supply chain disruption, but said he he hoped the Government would “look at the tools we have to combat” any resulting inflation and price hikes if it became necessary.

“In The Bahamas, a lot of businesses are struggling a bit with what’s going on here locally,” he added. “If the worst comes to the worst, hopefully the Government loosens up a bit with the burden on businesses here - taxes, processes - to help ease the external burden from overseas.”