Impact of Trump's Tariffs on Global Economy: Implications for Costa Rica
Costa Rica's economic landscape faces challenges as the U.S. imposes a 10% tariff on key exports.
The United States is a significant destination for Costa Rican exports, accounting for nearly 47% of the nation's total exports, which amounted to approximately $9.4 billion in 2024. Approximately 500 American companies operate in Costa Rica, employing around 152,000 individuals, making the U.S. the primary source of foreign direct investment (FDI) in the country.
The recent decision by the Trump administration to impose a 10% tariff raises concerns among Costa Rican analysts regarding potential repercussions on trade relations with the U.S., as well as implications for the multilateral trading system governed by the World Trade Organization (WTO), to which both nations belong.
Experts warn that the effects on Costa Rica will vary depending on the types of exported goods and the competitive landscape in the market.
Agricultural products may bear the brunt of the tariffs due to numerous competitors, while high-value goods, such as medical devices and technological products, might remain largely unaffected in terms of demand.
Caution is advised as economists suggest monitoring U.S. market behavior closely to gauge impact.
In 2024, Costa Rica exported significant products including medical devices, pineapples, bananas, tires, and coffee.
The export structure has generally been robust, with specialists like economist Víctor Umaña asserting that the tariff will not fundamentally disrupt Costa Rica’s productive framework, which is built on established competitive advantages.
Umaña notes that a prolonged protectionist policy from the U.S. could deter investment and potentially trigger the repatriation of companies back to their home country.
Freddy Quesada, a financial executive, underscores the uncertainty these tariffs introduce into the broader economic landscape, reflecting a potential shift in the global economic structure.
He emphasizes the sequential and systemic effects that may emerge from this trade conflict.
While previous concerns suggested a mass exodus of American businesses from Costa Rica due to tariffs, Alexander Mora, a former Minister of Foreign Trade, allays fears, indicating that these tariffs primarily target products rather than services, thereby limiting their direct impact on service-oriented firms.
The diversified economic structure of Costa Rica is seen as a protective measure against tariffs, albeit with caution needed regarding potential future U.S. policies aiming to repatriate economic activities.
Currently, over 1,000 FDI companies are established in Costa Rica, with U.S. firms representing 44.6% of this total.
These include institutions across various sectors, notably services, commerce, and manufacturing.
In this context, the manufacturing sector faces particular vulnerability, especially pertaining to electronic products and medical devices that rely heavily on the U.S. market.
Roberto Echandi, an expert from the World Trade Institute, warns that the tariffs could lead to increased prices for imported goods in the U.S., likely decreasing consumption and adversely affecting Costa Rican exports.
Nevertheless, the comparatively lower tariff of 10% presents a relative advantage against countries facing higher tariffs.
Analysts express concerns that a potential U.S. recession could substantially threaten Costa Rican economic stability, recalling historic downturns that may limit the country’s ability to respond effectively.
The overarching sentiment among economists is a need for proactive measures by the Costa Rican government to ensure competitiveness amidst these evolving trade dynamics.
The recent decision by the Trump administration to impose a 10% tariff raises concerns among Costa Rican analysts regarding potential repercussions on trade relations with the U.S., as well as implications for the multilateral trading system governed by the World Trade Organization (WTO), to which both nations belong.
Experts warn that the effects on Costa Rica will vary depending on the types of exported goods and the competitive landscape in the market.
Agricultural products may bear the brunt of the tariffs due to numerous competitors, while high-value goods, such as medical devices and technological products, might remain largely unaffected in terms of demand.
Caution is advised as economists suggest monitoring U.S. market behavior closely to gauge impact.
In 2024, Costa Rica exported significant products including medical devices, pineapples, bananas, tires, and coffee.
The export structure has generally been robust, with specialists like economist Víctor Umaña asserting that the tariff will not fundamentally disrupt Costa Rica’s productive framework, which is built on established competitive advantages.
Umaña notes that a prolonged protectionist policy from the U.S. could deter investment and potentially trigger the repatriation of companies back to their home country.
Freddy Quesada, a financial executive, underscores the uncertainty these tariffs introduce into the broader economic landscape, reflecting a potential shift in the global economic structure.
He emphasizes the sequential and systemic effects that may emerge from this trade conflict.
While previous concerns suggested a mass exodus of American businesses from Costa Rica due to tariffs, Alexander Mora, a former Minister of Foreign Trade, allays fears, indicating that these tariffs primarily target products rather than services, thereby limiting their direct impact on service-oriented firms.
The diversified economic structure of Costa Rica is seen as a protective measure against tariffs, albeit with caution needed regarding potential future U.S. policies aiming to repatriate economic activities.
Currently, over 1,000 FDI companies are established in Costa Rica, with U.S. firms representing 44.6% of this total.
These include institutions across various sectors, notably services, commerce, and manufacturing.
In this context, the manufacturing sector faces particular vulnerability, especially pertaining to electronic products and medical devices that rely heavily on the U.S. market.
Roberto Echandi, an expert from the World Trade Institute, warns that the tariffs could lead to increased prices for imported goods in the U.S., likely decreasing consumption and adversely affecting Costa Rican exports.
Nevertheless, the comparatively lower tariff of 10% presents a relative advantage against countries facing higher tariffs.
Analysts express concerns that a potential U.S. recession could substantially threaten Costa Rican economic stability, recalling historic downturns that may limit the country’s ability to respond effectively.
The overarching sentiment among economists is a need for proactive measures by the Costa Rican government to ensure competitiveness amidst these evolving trade dynamics.
