Caribbean & Central America - January 2026

On 10 December, the Office of the US Trade Representative (USTR) announced phased-in tariffs on Nicaraguan imports.

The tariffs will be phased in over two years on all imported Nicaraguan goods that do not originate under the Dominican Republic-Central America-US Free Trade Agreement (Cafta-DR). From 1 January this year the tariff will be set at 0%, before ramping up to 10% on 1 January 2027 and 15% on 1 January 2028.

According to the USTR, the tariffs are designed “to address Nicaragua’s acts, policies, and practices related to abuses of labor rights, abuses of human rights and fundamental freedoms, and dismantling of the rule of law”. The tariffs will stack with others, such as an 18% reciprocal tariff currently imposed on imports, and the timeline and tariff rates are subject to change if Nicaragua shows “a lack of progress in addressing these issues”. 

While the move is significant given the fact that the US remains Nicaragua’s largest export market, despite deteriorating relations between the governments of the two nations in recent years, there is still plenty of scope for Washington to take further action. For example, the tariff rates are far lower than the 100% tariff floated by the USTR in October, and the exception for goods originating under Cafta-DR constitutes a significant carve out. 

The US could increase tariffs whenever it wants, and it could also move to expel Nicaragua from the Cafta-DR agreement, but so far officials have not taken stronger action. The USTR said that the move “balances the need for action and the importance of limiting disruption for U.S. businesses,” but officials may also be moving cautiously to avoid triggering a wave of mass immigration to the US southern border.

It is also possible that more concerted action to pressure the authoritarian government led by co-presidents Daniel Ortega and Rosario Murillo simply hasn’t been a priority so far during US President Donald Trump’s second term in the White House, although his recent aggressive action to remove Venezuela’s now former president Nicolás Maduro (2013-2026) will likely worry the Frente Sandinista de Liberación Nacional (FSLN) government as it provides further evidence that Trump is willing to disregard international law in pursuit of his goals.

These tariffs, and potential future action to exert pressure on the Nicaraguan economy, could also benefit regional peers such as El Salvador and Guatemala, both of whom recently signed bilateral trade deals with Washington which would make their own exports comparatively cheaper in the US market. Shifting trade relationships could also encourage manufacturers, such as those in the textile industry, to move existing capacity from Nicaragua to those regional peers.

Trade deficit

On 27 November Nicaragua’s central bank (BCN) released new figures showing that the country’s exports totalled US$6.81bn in the first nine months of 2025, up 15.8% on the same period the previous year. Growth was driven by a 27.6% increase in goods exports and a 1.6% increase in free zone goods. Goods exports in turn were driven by a 49.2% increase in mining exports (which totalled US$1.46bn), and a 43.1% rise in agriculture exports (US$1.12bn).  Meanwhile total imports reached US$8.52bn in the first nine months of the year, up 6.2% on the previous year. This resulted in a trade deficit of US$1.70bn in the first nine months of 2025, down 20.2% on the same period in 2024.