The Office of the U.S. Trade Representative has announced plans to phase in higher tariffs on imports from Nicaragua following a Section 301 determination that Nicaragua’s acts, policies, and practices related to abuses of labor rights, abuses of human rights and fundamental freedoms, and dismantling of the rule of law are unreasonable and burden or restrict U.S. commerce.
USTR states that the U.S. will impose an additional tariff on all imported Nicaraguan goods that are not originating under the Dominican Republic-Central America-U.S. Free Trade Agreement. This tariff will be set at zero on Jan. 1, 2026, and will increase to 10 percent on Jan. 1, 2027, and 15 percent on Jan. 1, 2028. This timeline and these rates may be modified if Nicaragua shows a lack of progress in addressing applicable issues.
USTR notes that this tariff will stack on top of other applicable tariffs, such as most-favored-nation duties and the 18 percent “reciprocal” tariff imposed under the International Emergency Economic Powers Act.
This action is not as stringent as those USTR had said it was considering, which included (1) suspending the application of some or all CAFTA-DR benefits to Nicaragua, including tariff concessions and cumulation of Nicaraguan content for other CAFTA-DR partners, and (2) tariffs of up to 100 percent on some or all Nicaraguan imports.
USTR said its decision to take more limited measures “balances the need for action and the importance of limiting disruption for U.S. businesses,” including limiting “the impact on U.S. exports to Nicaragua and U.S. companies producing in Nicaragua.” These factors have not always appeared to be considered by the current administration when imposing trade restrictions.
USTR explained that about half of the 2,006 written comments it received in response to its proposal expressed some sort of opposition, highlighting among other things the negative impact that a broad application of trade restrictions would have not only on the U.S., by causing disruptions in supply chains, but also on Nicaragua, by harming businesses there that export to the U.S. and resulting in increased unemployment (which, though USTR did not say this explicitly, could encourage illegal immigration from Nicaragua, something the Trump administration is trying to minimize). Even those commenters who supported the proposal, USTR said, requested that action be tailored to maximize leverage while avoiding damage to their specific interests (producing in, importing from, or exporting to Nicaragua) or the livelihoods of Nicaraguan workers.
Copyright © 2025 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.