(In photo: President Donald Trump arrives at Palm Beach International Airport, Friday, April 11, 2025, in West Palm Beach, Fla. (AP Photo/Manuel Balce Ceneta)
Figuring out the likely impact of US President Donald Trump’s tariffs has been a necessary concern for many Bermuda businesses during the past three months.
For retailers, builders and reinsurance professionals alike, the erratically implemented, up-down, on-off taxes on trade between the US and almost every other country will be a factor they need to somehow incorporate into their planning for the future.
The prospect of proposed port fees, under the US Ships Act, of up to $1.5 million per call for vessels built or flagged in China, such as Bermuda Container Line’s MV Oleander, could have had particularly horrendous consequences.
However, on Easter weekend, there was much relief with the US Trade Representative’s announcement that short sea routes and smaller vessels were expected to be exempt from the fees.
Construction costs in Bermuda have soared in recent years with the island forced to import aggregate because of exhausted local quarries and the effects of general inflation.
The tariffs could bring another inflationary surge, with many local construction companies served by US suppliers who source some of their materials from tariff-targeted countries including Canada and China.
Any retailers who buy non-US produced goods from a US supplier will also feel the pinch and will need to be creative to avoid costs surges.
For example, Sacha Bearden, owner of Baptiste, a construction supplies business, told The Royal Gazette that although many of the goods she brings in are made in the US, others are made in Vietnam, a new tariff target. Some materials are from Mexico, delivered to bonded warehouses in Florida from where they are shipped to Bermuda without attracting a tariff.
In February, when Mr Trump had revealed only tariffs on China, Canada and Mexico, the Bermuda Chamber of Commerce warned the result was likely to be an increase in the cost of living. Since then, the US has ratcheted up the pain, imposing at least a 10 per cent tariff on nearly every other trading partner.
With many Bermudians already struggling from the generational spike in the cost of living seen since the pandemic, a resurgence of inflation is the last thing the island needs.
Services are not in Mr Trump’s crosshairs. Bermuda is a significant exporter to the US of financial services, predominantly re/insurance.
However, that does not mean Bermuda’s re/insurers will be unaffected. Claims for rebuilding after hurricanes could be higher, given the likely inflationary impact on construction materials. In the event of a recession spurred by tariff-driven inflation, insurance demand would fall as economic activity slowed.
Instability in the bond market that has already been evident since the tariff shock started to reverberate will impact the value and yield of the fixed-income securities that dominate re/insurers’ investment portfolios, potentially eroding returns and capital bases.
In these tumultuous economic times, there are many uncertainties ahead.
