Dear Editor,
Key takeaways
• The tariff outcome was largely outside of Guyana’s control. Nonetheless, through effective negotiation and engagement, the Government successfully secured a reduction from the initially proposed 38 per cent to a final rate of 15 per cent, demonstrating strong diplomatic and policy management under constrained conditions.
• Guyana was not singled out by the United States. The revised tariff regime was applied across all US trading partners, with rates varying based on country-specific trade dynamics. As such, Guyana’s positioning remains competitive relative to international peers, and the adjustment does not place it at a systemic disadvantage.
• Scenario modelling indicates that maintaining a 15 per cent tariff alongside a stable exchange rate delivers better outcomes than a scenario where the exchange rate appreciates by 15 per cent and the tariff is reduced. This underscores the critical importance of coordinated foreign exchange and trade policy – especially when viewed through the lens of Dutch Disease risk. In fact, applying the same 15 per cent tariff to a simulated appreciated exchange rate produced a more negative outcome, reinforcing the value of nominal stability.
• The Government’s FX policy has helped stave off Dutch Disease, ensuring that the nominal exchange rate does not appreciate excessively. This strategic restraint has preserved the competitiveness of non-oil sectors, enabling a more balanced and diversified economic trajectory.
• Forward-looking policy investments are positioned to offset the impact of the tariff. These include a national strategy to halve energy cost (gas-to-energy), an expansive infrastructure development programme that would lower logistical costs, and over GYD 80 billion in tax expenditure to subsidise fuel. Collectively, these measures are set to enhance Guyana’s medium-term export competitiveness and support a resilient, private-sector-led growth model.
The recent increase in US tariffs on Guyanese exports – from 10 per cent to 15 per cent – has sparked public debate. But far from being a diplomatic failure, this adjustment reflects Guyana’s rising global competitiveness. Analysis shows that Guyana’s currency is undervalued in real terms, with a widening gap between its nominal exchange rate and its purchasing power parity (PPP) value. Comparative data from 2014 to 2024 confirms that Guyana has the largest PPP-market rate differential in the Caribbean, outpacing Trinidad, Jamaica, and the Dominican Republic. Importantly, scenario modelling shows that a stable exchange rate with a slightly higher tariff may be more favourable than a lower tariff paired with an appreciated currency – demonstrating the importance of sound exchange rate policy.
In August 2025, the United States raised tariffs on Guyanese exports from 10 per cent to 15 per cent. This adjustment followed a prior 90-day negotiation window after Guyana was initially earmarked for a 38 per cent tariff. While some critics labelled this outcome as a policy failure, a deeper analysis reveals that the adjustment is best interpreted as a reflection of Guyana’s increased economic competitiveness. The decision is likely rooted in macroeconomic fundamentals, including structural shifts in Guyana’s economy and widening differentials between its nominal exchange rate and purchasing power parity (PPP) benchmarks (PPP is a theoretical framework used to compare the relative value of currencies and cost of living between countries). It allows for the comparison of different currencies by eliminating the effects of exchange rate fluctuations and adjusts for differences in price levels across countries.
Analysis and Discussion
PPP Trends and Trade Competitiveness: Between 2012 and 2024, Guyana experienced a steady decline in its PPP conversion factor, indicating increased real exchange rate competitiveness. Compared to Trinidad and Tobago, Jamaica, and the Dominican Republic, Guyana showed the sharpest appreciation in real terms, with the PPP–market rate differential rising from 105 per cent in 2014 to 175.5 per cent in 2024. This suggests that Guyana’s goods have become increasingly affordable in US dollar terms – enhancing export attractiveness and potentially triggering corrective trade measures, such as tariffs. While PPP is a theoretical construct, it remains a valuable lens to interpret long-term exchange rate misalignments and trade competitiveness.
Consolidated PPP Analysis and Exchange Rate Differential Trends (PPP Rates and Market Rates: 2014-2024): The consolidated analysis (below) compares PPP conversion factors, market exchange rates, and their resulting differentials across Guyana, Trinidad & Tobago, the Dominican Republic, and Jamaica over the 2014–2024 period. The differential between market rates and PPP rates indicates real exchange rate misalignments, which reflect price Competitiveness and can influence trade policy decisions such as tariff assignments.
Key Observations
• Guyana shows the sharpest real appreciation, with the differential rising from 105 per cent in 2014 to 175.5 per cent in 2024. This suggests a strong price competitiveness advantage, which aligns with the 15 per cent US tariff imposed on its exports.
• Trinidad & Tobago also experienced growing real appreciation, with the differential widening from 46.3 per cent to 86.5 per cent. While less dramatic than Guyana’s, this increase supports the 15 per cent tariff as a policy response to enhanced competitiveness.
• The Dominican Republic displayed consistent real depreciation until 2021, when the differential surged to 170.9 per cent, later stabilising to 153.3 per cent. The relative competitiveness was less aggressive than Guyana, correlating with a lower 10 per cent tariff.
• Jamaica, in contrast, showed a moderate early-period depreciation but then a narrowing differential – declining from 87.6 per cent in 2016 to 66.1 per cent in 2024 – indicating stable real exchange alignment and more limited trade leverage, consistent with a 10 per cent tariff.
Scenario-Based Exchange Rate Impact Assessment
To contextualise the implications of the 15 per cent tariff, a scenario-based analysis was conducted. Under the current stable exchange rate of GY$216 to US$1, an export value of US$100 million results in a post-tariff cost of GY$24.84 billion. However, under a simulated 15 per cent appreciation in the exchange rate to GY$184 to US$1 with a reduced 10 per cent tariff, the cost decreases to GY$20.24 billion – highlighting the importance of foreign exchange policy in moderating import costs. A third scenario considers both currency appreciation and an increase in export value to US$118 million. Despite the higher export value, the post-tariff cost (GY$23.88 billion) is higher than the baseline scenario, highlighting the critical impact of exchange rate alignment and tariff strategy. This scenario demonstrates that US$100 million worth of goods, taxed at 15 per cent with a nominal exchange rate of GY$216, results in a lower cost in USD terms than US$118 million worth of goods taxed at 10 per cent, even when paired with a 15 per cent appreciation in the exchange rate. The implication is that a stronger currency and lower tariff do not necessarily offset the cost impact of increased export value – especially when the exchange rate appreciation reduces the local currency value of exports. This underscores the importance of carefully balancing exchange rate policy with tariff negotiations to optimise trade outcomes.
