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Thursday, April 3, 2025

Costa Rica Faces Economic Risks from Trump’s Liberation Day Tariffs

United States President Donald Trump announced a sweeping new tariff program today, dubbed “Liberation Day,” which imposes a universal 10% tariff on all imports into the United States, with additional “reciprocal tariffs” reaching up to 50% on certain nations. Starting April 3, 2025, the U.S. will also apply 25% tariffs on all foreign-made cars, following earlier tariffs on Canada, Mexico, and China. These measures, aimed at addressing trade imbalances and protecting American jobs, are already causing ripples across Central America, with Costa Rica facing significant economic challenges due to its heavy reliance on U.S. trade.

Central America, a region deeply integrated with the U.S. economy, is bracing for the fallout. The U.S. is a primary export market for many Central American countries, including Costa Rica, which sends 47% of its exports—such as medical devices, pineapples, and coffee—to the U.S. Trump’s tariffs, while initially focused on Canada, Mexico, and China, now extend globally, meaning Costa Rican goods will face the 10% baseline tariff, with potential increases if reciprocal measures are deemed necessary. Economists warn that these tariffs could raise costs for U.S. importers, reducing demand for Costa Rican products and threatening jobs in export-driven sectors.

For Costa Rica, the impact could be particularly acute. The country’s economy is already strained by a strong colón, which has hurt tourism—a key revenue source—per the National Chamber of Tourism. Higher tariffs may further depress agricultural exports like coffee, a staple often highlighted in trade discussions. Small farmers, already grappling with global price fluctuations, could see their livelihoods squeezed if U.S. buyers turn to domestic or tariff-free alternatives. Additionally, the 25% tariff on foreign-made cars could indirectly affect Costa Rica’s logistics sector, which supports regional trade flows, potentially increasing shipping costs.

The broader Central American region faces similar risks. Countries like Guatemala and El Salvador, visited by U.S. Secretary of State Marco Rubio in February 2025, rely on U.S. trade for economic stability. Retaliatory tariffs from Central American nations could escalate tensions, but their smaller economies lack the leverage to counter U.S. policies effectively. For Costa Rica, the hope lies in diplomatic negotiations to secure exemptions, as seen with Mexico and Canada’s temporary USMCA-compliant goods reprieve until April 2. Without such relief, Costa Rica’s export-driven growth may falter, deepening economic woes in 2025.

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