What Trump’s tariffs mean for the Pacific?

By James C. Pearce

As I was combing through tariff-related data, several other things cropped up, namely elections in Canada, Amazon pricing, President Trump backtracking and communist China claiming a sand bank belonging to the Philippines. All had the ability to affect where things stood vis-à-vis the tariffs introduced by the Trump administration.

The more I dug into this topic, the more I realized how little sense the tariffs made.

Whether or not one voted for President Trump, it is hard to say exactly what he was thinking when he slapped tariffs on the Pacific island nations. Be it America’s economic partnerships, military alliances, or diplomatic presence, nothing obvious stood out.

Former President William McKinley, whom Trump admires, even came to see the folly in taxing this region.

If there is any good news, it is that most Pacific island countries were spared relatively lightly in Trump’s tariff announcement. Ten countries got 10 percent, which was the minimum. Three unlucky countries were given much higher rates: Vanuatu, 23 percent; Nauru, 30 percent; and Fiji, 32 percent.

I spent a few days searching for an answer to this and, honestly, nothing made sense.

Fiji’s exports to the U.S. pale in comparison and its exports, such as Fiji Water, tuna and exotic fruits, are not exactly undercutting American businesses and workers.

Niue and Palau escaped tariffs. Again, no discernible or logical reason was obvious. Niue recently realigned with China, blessed with 145 percent tariffs, and Palau is freely associated with the U.S. under the Compact of Free Association.

The Federated States of Micronesia and the Marshall Islands, where the Kwajalein airbase is located, both welcomed a 10 percent tariff. While lower, it still threatens to disrupt supply chains all the way up to the Canadian Pacific coast.

For absolutely no reason, the Cook Islands received a 10 percent tax, while Tokelau was subject to tariffs, despite being a dependent territory. Tokelau exports about $150,000 to the U.S. (about the value of my house). The U.S. economy is worth approximately $30 trillion. Most of what America sends to Tokelau is listed as "commodities not elsewhere specified," which is a catch-all term for goods that do not fit into any category. 

The "economic" explanation offered in D.C. is that the Pacific tariffs are not reciprocal. Instead, they are linked to the trade deficit or surplus each country is running with the U.S. Fiji, for instance, exported $366 million worth of goods to the U.S. in 2023, about 8 percent of its GDP.

Two-thirds of this amount derived from exports of Fiji Water and another 14 percent from tuna. By contrast, the value of U.S. exports to Fiji was only $158 million (therefore, a 32 percent deficit). But this defies basic logic, not to mention simple economics.

Countries with a large trade surplus with the US (i.e., they export significantly more to the U.S. than they import) received the highest tariffs – think Canada and Mexico. Yet, the Pacific joined the 10 percent club.

On top of that, Vanuatu and Nauru do not consistently run trade surpluses with the U.S. (except in 2024, according to the UN database). Until 2024, both countries were running deficits with the US. Tariffs on these countries, therefore, were frankly absurd and unnecessary.

The Pacific is not a large goods trading region, and most countries neither export nor import much from the U.S. The Pacific is a much bigger exporter

of services, such as tourism, but these were excluded from the tariff calculations.

Since Pacific nations are not running large goods trade surpluses with the U,S., most received only the minimum tariff.

However, that means the direct impact of the tariffs on the Pacific may be limited, certainly in comparison to America’s neighbors and Asia.

That Vanuatu has not panicked should have told us something.  First, the amounts at stake are much smaller. Only two of the Pacific countries that were subjected to tariffs have a ratio of exports of goods to the U.S. in excess of 2 percent of their GDP: Fiji (7.7 percent) and the Marshall Islands (8.1 percent).

Fisheries will suffer, whereas luxury products like Fiji Water will be able to withstand any tariffs since profits are high.

There will also be indirect impacts. Shipping costs will go up, as will any products coming from China (like phones). Trump has also withdrawn from the Paris climate agreements and other countries, like the UK, are also reducing its assistance to this part of the world. It would, therefore, be wise to think of alternative partners for lower prices and better market access.

The EU and India would be the best counterweights to US tariffs in this regard, not to mention China. Lower commodity prices, for instance, will mean cheaper gas prices.

However, the worse the impact on the global economy, the worse it will be on the Pacific. It cannot escape the tariffs' knock-on effect. As Bill Maher noted on Real Time, Trump’s approach to China was akin to picking a fight with a bigger bully without leverage.

With higher costs, it will mean lower numbers across the board: prices for exports, the dollar, tourists, trade, income, assistance, trucking volumes, markets, jobs and remittances. The tariffs are nothing to panic about but they are a warning shot. Let’s hope the Pacific heard it.

Dr. James C. Pearce previously worked at the University of Liverpool and the College of the Marshall Islands, and lived in Russia for almost a decade. He is the author of “The Use of History in Putin's Russia”, and has written on Russian memory politics, historical narratives, education policy and historical anniversaries. Send feedback to jcpearce.91@gmail.com.

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