AS global trade brace for impact under US President Donald Trump’s imminent tariff measures, Fiji may well fly under the radar on account of our miniscule size and trade volume.
However, Westpac director and senior economist Justin Smirk has cautioned that there is a possibility that we could blip on the US tariff’s radar screen as one of the countries in the world that charges Value Added Tax (VAT).
“If you’re thinking about your exports to the US, you know that your exports in the US to Fiji are quite small,” Mr Smirk said at a breakfast event organised by the Fiji Australia Business Council on Tuesday.
“So you know there’s not going to be a direct hit. “You can probably sail under the radar.
“I’d like to say that because we’re small and we don’t matter that much, but they are looking at reciprocal tariffs in the US.
“Even to the extent of just because the US doesn’t have VAT, they’re arguing that because VAT is applied to all goods produced in the country and all goods consumed in a country including imports, it’s a tax on imports.
“But VAT gets refunded when you export. And the Americans are arguing: that’s a subsidy. “You’re supporting your exports, you’re hitting our imports, we’re going to tariff you.
“So any country with a VAT, get ready for a countering US tariff.
“And I can’t think of any country in the world that I work in, think about and deal with that does not have a VAT.
“So, again, in the export side it’s all really nice and we can probably sail under the radar because we’re so small, but, watch this space,” Mr Smirk said.
While it’s early days globally to know how US tariff will affect each country, most economists have come up with possible scenarios.
Mr Smirk said small and open economies like Fiji may actually benefit from the tariff fallouts in the bigger economies.
“If everyone is putting in tariffs, if everyone wants to homeshore, those factories that exist in China aren’t going to disappear. Those factories in South East Asia aren’t going to disappear.
“I talked about tariffs adding to inflation, but they can also help reduce inflation by creating over production.
“And you’ll have consumer goods circulating around the world looking for a home.
“Particularly things like electric cars, white goods and electronics.
“There’ll be ample load of supply of them and they’re going to be a counter factor to the tariff.
“So countries that are small and open and take imports are set to benefit from some of this,” Mr Smirk said.
NOTE: This article was first published in the print edition of the Fiji Times dated MARCH 1, 2025.
