Welcome back to Talking Dollars & Making Sense. Today, we’re diving into the complicated world of international trade, specifically, how recent U.S. tariff policies and China’s dumping practices are impacting Guyana. Let’s break down what these policies mean for our local businesses and economy.
China’s Big Problem: Too Much Stuff
To fully grasp why China’s trade policy is causing trouble, we need to understand what’s happening within China itself. Right now, China is dealing with three major problems: a consumption crisis, a real estate meltdown, and massive overproduction. Back in 2020, China’s real estate market collapsed, devastating investors and significantly reducing people’s home equity. As a result, Chinese citizens are now cautious spenders, choosing savings over shopping.
Five years after this crisis, consumer spending remains lower than pre-pandemic levels. With fewer buyers at home, China now has huge surpluses of everything from cheap consumer products to luxury goods.
China’s Solution: Export the Problem
To kickstart its economy, China has ramped up exports dramatically. Exports now represent about 20% of China’s massive $19 trillion GDP, giving China a whopping $1 trillion global trade surplus. How is China achieving this? By aggressively pushing cheap goods onto foreign markets, often selling at prices much lower than local manufacturers and retailers can match.
Additionally, China extends loans to countries like Guyana, requiring these nations to hire Chinese workers for major projects. This helps China export not only its excess products but also its excess labour. The Chinese government further supports this approach through subsidies, making their products cheaper abroad. Countries worldwide, from Indonesia and Brazil to Canada and India, have accused China of “dumping” these products, undermining their local businesses and economies.
Guyana’s Struggle with Chinese Dumping
In Guyana, this dumping is causing severe harm. Local businesses simply cannot compete with prices that low. Imagine being a local manufacturer, suddenly faced with Chinese-owned stores selling items priced below your production costs. Initially, this might seem great for consumers who enjoy low prices, but over time, local businesses fail, workers lose jobs, and entire industries collapse.
Many Guyanese businesses have already closed their doors or drastically reduced operations because of this intense pressure. Local entrepreneurs are urging the Guyanese government to intervene, citing examples of anti-dumping actions taken by other countries. Yet, so far, the government has not taken steps to protect local businesses.
Learning from Other Countries
Countries like Indonesia, Brazil, Argentina, and even larger economies like the United States and the European Union have responded by implementing anti-dumping duties. Indonesia banned TEMU, a major Chinese e-commerce platform, from operating within its borders. Other nations imposed heavy tariffs on Chinese textiles, apparel, footwear, steel, aluminium, electric cars, and solar panels. These protective measures are designed to ensure local industries survive and grow.
Guyana could learn from these examples. Even as our gas-to-shore project promises cheaper energy, boosting manufacturing potential, our local producers will still fail if forced to compete against heavily subsidized Chinese imports.
America’s Tariff Troubles
Now, let’s look at the other side of the globe, America’s recent trade policy. Under President Trump, the U.S. introduced massive global tariffs aimed at correcting America’s trade imbalances. While the intention was to protect U.S. interests, these tariffs have hurt all countries, including Guyana.
Here’s how the U.S. calculated tariffs on Guyana: In 2024, Guyana exported around $5.5 billion worth of goods, mainly oil, to the U.S., but imported only about $1.3 billion from the U.S. This left Guyana with a $4.2 billion trade surplus. Following a bizarre calculation, the Trump administration imposed a significant 38% tariff rate on Guyanese exports. Thankfully, the U.S. excluded oil exports, which account for approximately 90% of Guyana’s exports, from tariffs. But this exemption also underscores a strange irony: our oil exports create a large surplus that triggers higher tariffs on non-oil products.
The Direct Impact of U.S. Tariffs
Even though the majority of our exports to the U.S. won’t face tariffs, certain local companies will still be affected. Firms like DDL, Banks DIH, and various food manufacturers will feel the pinch. Fortunately, these companies do not rely heavily on the U.S. market, reducing the immediate impact. Nonetheless, these tariffs create uncertainty and higher costs, complicating business operations.
The Risk of a Global Economic Slowdown
Perhaps a more serious concern from U.S. tariffs is the broader economic impact. History shows us tariffs can trigger retaliatory measures, leading to global trade slowdowns or even recessions. About 95 years ago, the infamous Smoot-Hawley Tariff Act of 1930 worsened the effects of the Great Depression.
If the global economy slows due to these trade wars, oil prices would likely drop significantly. We’ve already seen Brent crude oil prices fall sharply to around $65 per barrel, threatening Guyana’s main revenue source. A global recession could severely impact Guyana’s overall economic stability, especially in non-oil sectors.
Comparing Threat Levels: Chinese Dumping vs. U.S. Tariffs
Both U.S. tariffs and China’s dumping policies pose significant threats to Guyana’s economy.
China’s dumping practices present an immediate and direct danger by systematically undermining local industries and businesses. This can lead to lasting economic damage, weakening the foundations of Guyana’s economy. On the other hand, U.S. tariffs negatively affect Guyanese exporters by reducing their competitiveness in the U.S. market. Moreover, if global economic growth slows, Guyana could experience a substantial reduction in oil revenue, which would further slow economic activity in the non-oil sectors.
In simpler terms, China’s policies risk permanently harming the core of Guyana’s economic structure, while U.S. tariffs threaten to disrupt exports and dampen overall economic growth.
Steps Guyana Must Take
Given these challenges, it’s essential for the Guyanese government to act decisively and swiftly. Introducing anti-dumping duties on imports from China is crucial. Examining successful strategies employed by countries such as Brazil, Canada, and India can provide valuable insights and practical guidance.
With respect to the United States, Guyana should avoid retaliating with reciprocal tariffs, as this would essentially impose additional taxes on its own citizens. Instead, Guyana should engage diplomatically with the United States, clearly communicating why removing tariffs serves America’s strategic interests. Highlighting that most of Guyana’s current oil production is managed by major U.S. companies, ExxonMobil and Hess, illustrates that Guyana significantly contributes to U.S. energy objectives. Indeed, it is primarily due to these substantial oil exports that Guyana maintains a trade surplus with the United States.
Moreover, Guyana must diversify its economy beyond the oil sector. Strengthening local industries and forming strategic partnerships with other international trading partners can reduce the country’s vulnerability to external economic disruptions, especially those arising from decisions made by major global economies.
Making Sense and Taking Action
At the end of the day, understanding trade policies and their implications helps us demand better decisions from our leaders. Both China and the U.S. present challenges. The government must step up and safeguard our local industries.
Together, let’s keep the conversation going. Stay informed, ask questions, and push for policies that protect Guyana’s economic future. As always, feel free to share your thoughts. Until next time, keep thinking critically.