Central Bank of Barbados paper estimates 1.27–2.33 percent GDP loss from 2025 US 10 percent global tariff hike

The Central Bank of Barbados published a policy paper assessing the macroeconomic consequences for Barbados of the 2025 US global tariff hikes, modelling a range of downside outcomes for growth and inflation in a small, open economy with deep trade and tourism links to the US. Across goods exports and tourism channels, the paper estimates total real GDP losses of 1.27–2.33 percent under adverse scenarios, while noting that policy options are constrained by the fixed exchange rate regime. Goods exports to the US are projected to contract by USD 15.6–17.8 million, translating into real GDP losses of USD 23.4–26.7 million (0.23–0.26 percent of GDP) after applying multipliers. For tourism, where the US accounts for roughly one-third of long-stay visitors, a 7.5 percent (baseline) to 15 percent (severe) decline in US travel spending is estimated to reduce GDP by 1.04–2.07 percent. The inflation outlook deteriorates in the modelling, with total inflation projected at 3.2–3.7 percent in a tariff-only scenario and up to 4.5 percent if shipping fees are also imposed, amplified by heavy reliance on US imports (30 percent for food and 85 percent for fuel). The paper also highlights the constraints from the Barbados dollar’s 2:1 peg to the US dollar, reports foreign reserves of USD 3.4 billion (32.4 weeks of import cover) as at end-March 2025, and points to possible fiscal stress as revenues soften and support costs rise, including estimated food and energy subsidies of USD 85–100 million and public debt increasing to 108–112 percent of GDP under stress scenarios.