The impending U.S. tariffs under President Trump may overlook Fiji’s small trade volume, but economist Justin Smirk warns of VAT implications potentially drawing Fiji into tariff discussions. Smirk suggests that small economies like Fiji might benefit from global surplus created by larger nations’ tariff actions, leading to a diverse supply of consumer goods in the global market.
As global trade braces for the impact of the imminent tariff measures proposed by U.S. President Donald Trump, Fiji may remain largely unaffected due to its small size and minimal trade volume. Justin Smirk, the director and senior economist at Westpac, has warned, however, that Fiji could still be noted under the U.S. tariffs due to its application of Value Added Tax (VAT).
Mr. Smirk explained at a recent breakfast event hosted by the Fiji Australia Business Council that while exports from the U.S. to Fiji are modest, the situation may change as the U.S. explores reciprocal tariffs. “If you’re thinking about your exports to the U.S., you know that your exports in the U.S. to Fiji are quite small,” Mr. Smirk stated. He emphasized that despite Fiji’s minimal impact, the U.S. may view VAT as an indirect subsidy affecting import tariffs.
He elaborated that VAT, which is refunded upon export, is perceived by Americans as contributing to competitive advantage in trade, leading to potential counter-tariffs. Mr. Smirk noted that nearly every country he deals with imposes VAT, suggesting that countries with such taxation should prepare for possible U.S. tariff responses. “So any country with a VAT, get ready for a countering U.S. tariff.”
Looking broadly, Mr. Smirk suggested that small and open economies like Fiji might actually find opportunities amid the repercussions of larger economies imposing tariffs. He observed that if many nations implement tariffs and seek to reshore production, the factories in China and Southeast Asia will not vanish; they will continue producing surplus.
“I talked about tariffs adding to inflation, but they can also help reduce inflation by creating overproduction,” he continued. With excess supply of consumer goods, particularly in sectors such as electronics and electric vehicles, smaller nations like Fiji could benefit from the influx of affordable imports fueled by global market adjustments.
In conclusion, while Fiji may initially evade significant direct impacts from U.S. tariff actions due to its smaller market, it remains imperative to stay vigilant about potential developments surrounding VAT and international trade dynamics. Scenarios presented by economists indicate that, paradoxically, Fiji may find some benefits in the broader shifts of global trade patterns as larger economies grapple with tariff implications.
In summary, while Fiji’s minor trade volume may shield it from direct impacts of U.S. tariffs, there is a need for caution due to potential repercussions stemming from its VAT system. Economists suggest that the evolving global landscape could provide opportunities for small economies like Fiji, particularly as trade dynamics shift in response to widespread tariff implementations. Understanding these complexities will be essential for navigating future trade challenges.
Original Source: www.fijitimes.com.fj
