Five countries in Central America, together with the Dominican Republic in the Caribbean, have a free trade agreement with Washington, but this didn’t protect them from the punitive tariffs announced on President Trump’s “Liberation Day.”
A minimum 10 per cent tariff on exports to the US will hit low-income countries throughout the region. But exports from Nicaragua have been saddled with an even higher tariff of 18 per cent. Delighted opponents of Nicaragua’s Sandinista government have blamed it, rather than Trump, for the country receiving this additional penalty. However, simple examination of the figures shows that Nicaragua’s tariff was calculated in the same way as every other country’s.
Before examining the opposition media’s error-strewn reports, this article first explains the background: how the tariff was set, whether it is legitimate and how US-Nicaragua trade is changing. Then it turns to the opposition’s mistakes and explains how they are using Trump’s actions to bolster their attacks on Nicaragua’s government and people.
How the tariffs were set
Trump’s chart of tariffs has two sets of figures for each country: the “tariffs charged to the USA” and the “reciprocal tariffs” to be imposed this month. Bizarrely, the “tariffs charged to the USA” do not relate to actual tariffs charged on US imports. Instead, they are the product of a calculation based on each country’s trade gap with the US. For most countries, the value of these “tariffs charged” has been set at 10 per cent, on the basis that the US has no trade deficit with them, or only a small one. All of these countries (including Nicaragua’s neighbors) are hit with a “reciprocal tariff” of 10 per cent on their exports to the US, from this month onwards, even if they buy more from the US than they sell to it.
However, a higher “tariff charged” is calculated for countries with which the US is judged to have a bigger trade deficit. For each country, the White House looked up the deficit for its trade with the US in goods for 2024, then divided that by the total value of the country’s exports to the US. Trump, to be “kind”, said he would offer a discount, so halved that figure. The calculation was distilled into a formula.
For example, these are the figures for China:
- Goods trade deficit (exports from the US minus imports): – $291.9 billion
- Total goods imported to the US from China: $438.9 billion
- A ÷ B = – 0.67, or 67 per cent
- Half of this is 34 per cent, the new tariff being applied to China.
Based on this formula, the small African country of Lesotho was saddled with the highest “reciprocal tariff” of 50 per cent, while several major SE Asian countries were also hit with very high tariffs.
How Nicaragua’s tariff was calculated
Nicaragua’s “reciprocal tariff” was calculated in the same way. According to US trade figures, in 2024 US goods exports to Nicaragua were $2.9 billion, while US goods imports from Nicaragua totaled $4.6 billion. The US goods trade deficit with Nicaragua was therefore – $1.7 billion in 2024.
The calculation was therefore: trade deficit (- $1.7 billion) ÷ imports ($4.6 billion) = – 0.37, or 37 per cent, halved to produce a “reciprocal tariff” of 18 per cent.
This means that from April 9, there will be a new tax of 18 per cent on Nicaraguan goods sent to the US, payable as a customs duty on their arrival by the company or agency importing the goods.
How Nicaragua might contest the tariff
It seems unlikely that Trump will bend to pressure on the tariffs. However, at least in theory, there are three ways in which Nicaragua might argue that the tariff is wrongly imposed:
- Nicaragua’s Central Bank shows a smaller trade gap with the US. According to the Central Bank’s figures for 2024, Nicaragua’s exports to the US totaled $3.7 billion, not $4.6 billion, while its imports from the US totaled $2.7 billion, giving a trade gap of $1 billion, not $1.7 billion. On the basis of Trump’s tariff formula, the result should have been a 14 per cent tariff, not 18 per cent, if Nicaragua’s trade figures are correct. (A possible explanation for the difference may be the way that goods, originating in Nicaragua, are processed in other Central American countries before arrival in the US.)
- Although most Central American countries import more from the US than they export to it, Costa Rica also has a trade surplus with the US, amounting to $2 billion, bigger than Nicaragua’s, yet it is only being penalized by the standard “reciprocal tariff” (10 per cent).
- Most importantly, as the Guatemalan government pointed out, under the CAFTA-DR trade treaty new tariffs are illegal (under both US federal and international law). The treaty prohibits new tariffs or customs duties between the seven member countries. Therefore, all six of the other countries that are parties to CAFTA-DR are entitled to challenge the US for breaching it.
Action by CAFTA-DR members is complicated by the fact that Nicaragua is not only worst hit by the tariffs but is also a country that the US would like to exclude from the treaty completely, a point picked up below.
Changing significance of Nicaraguan exports to the US
Nicaragua’s Central Bank divides its trade figures between “merchandise” and products from free trade zones (principally, apparel). This, as we will see, confused the opposition media. This is the breakdown:
- Exports of merchandise (e.g. gold, coffee, meat, etc.) totaled $4.2 billion in 2024, with the US accounting for 38.7 per cent of these, or $1.62 billion.
- Exports from free trade zones were lower ($3.5 billion) but the proportion going to the US was much higher (59 per cent, or £2.08 billion).
- Of Nicaragua’s total exports, at $7.7 billion, $3.7 billion went to the US (48 per cent).
- Exports provide 39 per cent of Nicaragua’s annual income or GDP.
- Exports to the US therefore account for a significant 18 per cent of GDP.
These figures exclude services, such as tourism and transport, where trade between Nicaragua and the US is roughly in balance (unlike Guatemala and Honduras, with whom the US has a strong trade surplus in services).
Exports to the US have fallen slowly from over 50 per cent of the total two years ago, as the government looks for other markets. Exports to the Republic of China, for example, were four times higher in 2024 than in 2022, but (at $68 million) are still a small proportion. There are other growing export markets, of which the most notable is Canada (now the second biggest buyer of Nicaraguan merchandise).
The Nicaraguan government’s response to the tariffs is likely to involve continued efforts to diversify trade and keeping a watchful eye on the effects on different sectors of the economy. Producers of products like coffee and gold may be less affected as they already have diverse markets. On the other hand the apparel sector, which until this month enjoyed zero tariffs on its $2 billion exports to the US, is geared to the US market and might find greater difficulty in mitigating the tariff’s effects.
Celebration and misinformation in opposition media
Nicaragua’s opposition media, long financed by the US government, admit that they have been hit by Elon Musk’s cuts. How they are now funded is unclear. However, prominent opposition activists enjoy salaried employment in US universities and think tanks, where they call for sanctions that would hit poor Nicaraguans. Naturally, they welcomed Trump’s announcement.
Errors in reporting on the tariffs showed opposition journalists’ unfamiliarity with Nicaragua’s economy. Confidencial, in a piece translated and reproduced in the Havana Times, claimed that the tariff imposed on Nicaragua ignored a trade surplus “of $484 million in favor of the US” which “has been growing in recent years.” This completely ignored exports to the US from the free trade zones. The same error was made a day later by Despacho 505.
According to Confidencial, the reason for the higher tariff on Nicaragua (and on Venezuela, hit with a 15 per cent tariff) was to punish their authoritarian governments. In reality, the higher tariffs on both countries resulted from the application of Trump’s formula, but this deliberate misrepresentation was to be repeated.
In an “analysis” for Confidencial on April 4, Manuel Orozco painted the 18 per cent tariff as specifically aimed at the Nicaraguan “dictatorship” (again, linking it with Venezuela). Orozco is a former Nicaraguan now living in Washington, working for the Inter-American Dialogue, an NGO funded by the US government and its arms industry. It is most unlikely that he was unaware of how the tariff was calculated; misleading his readers strengthened his argument that the higher tariff was a purely political move.
Further articles in Despacho 505 and Articulo 66 also blamed political factors without explaining the arithmetic behind the tariff. In La Prensa, activist Felix Maradiaga wrongly remarked that the US accounts for over 60 per cent of Nicaragua’s exports. According to him, the supposed weakness of Nicaragua’s Sandinista government means the country will struggle to cope (he disregards its remarkable resilience in dealing with the much heavier economic consequences of the 2018 coup attempt and the 2020 pandemic).
Then, also in Confidencial, opposition activist Juan Sebastián Chamorro made the claim that the new tariffs, which of course he welcomes, are entirely compatible with the CAFTA-DR trade treaty. He argued that Washington’s action is justified on grounds of “national security.” This echoes the absurd classification of Nicaragua (during the first Trump administration, continued by Biden) as “an unusual and extraordinary threat to the national security and foreign policy of the United States.”
Opposition media are trying to present the new tariff as the first round of the stronger sanctions on Nicaragua that they have been urging Washington to adopt. They do this regardless of their illegality under the CAFTA-DR trade treaty or wider international law. The possibility of going further – excluding Nicaragua from the treaty – was trailed by Trump’s Latin America envoy, Mauricio Claver-Carone, in January, although he was careful to note the difficulties. But if this were to happen it would delight the opposition even further.
Obsessed with promoting regime change in Managua, these anti-Sandinista activists disregard the effects of tariffs and trade sanctions on ordinary Nicaraguans. On “Liberation Day” Trump showed his indifference to the millions of people in low-income countries whose livelihoods depend on producing food and other products for export to the US. The likes of Orozco, Maradiaga and Chamorro behave in just the same way.