Every country of the world has rejected the increase in tariffs that United States President Donald Trump has imposed or wishes to impose on them.
In The Bahamas there are growing fears that the tariffs would adversely affect the tourism product. Some Bahamian tourist officials, including hoteliers are predicting a downturn in the number of visitors.
Bahamas Hotel Tourism Association President, Jackson Weech said recently that there may be headwinds on the horizon for the tourism sector due to tariffs, consumer uncertainty and a generally guarded global financial outlook. “Now more than ever we realize how interconnected our world is fiscally, and how forces beyond our control will impact and drive our performance.”
With airlines full of tourists coming to The Bahamas on a daily basis and with the country anticipating that the new cruise port developed by Carnival Cruise Lines in Freeport, Grand Bahama will greatly transform that economy, we question whether the predictions could be justified.
While some Economists believe that the Trump tariffs would trigger a recession, we remain optimistic that with good marketing and management of our tourism sector that The Bahamas would fare very well.
According to an article in the Economist, America’s new tariffs have so far had surprisingly little impact on inflation.
“When the first post-Liberation Day data for personal consumption expenditures, the Federal Reserve’s preferred price index, came out on May 30th, evidence of tariffs’ impact was strikingly absent: seasonally adjusted goods prices rose by just 0.1 percent in April. Many companies will have hoarded imports and drawn down inventories in order to avoid raising prices. But the administration should not be cheering just yet. With tariffs higher than during much of the Depression, consumers are bound to see some effect in time. The question is how much, and how soon? To answer it, The Economist has produced an estimate of the impact of tariffs on prices.”
Since America is a fairly self-sufficient, services-driven economy, it is believed by some analysts that the potential impact of tariffs on consumer prices is small.
These analysts say that in April each percentage point of increased input cost from tariffs for a given category was associated with 0.14 points of “excess inflation” for that grouping. Because the consumption basket consists mostly of tariff-free services, these costs have risen by almost 1 percent economy-wide in the United States. Holding all else equal, this implies prices are just 0.13 percent higher than if Mr. Trump had never imposed new tariffs. No one knows where tariffs are heading. However, The Economist states if they remain at or below their current levels, firms may raise prices because of the tremendous uncertainty. If they do, prices for goods should rise relative to those for services, which would increase the estimate of the tariffs’ impact.
What Bahamian Tourism officials and the government must be most concerned about is the cost of a vacation in The Bahamas.
In his budget contribution in the House of Assembly last week, Deputy Prime Minister and Minister of Tourism Chester Cooper said, “The Bahamas is not just back — it is booming.” He said that Grand Bahama remains the fastest growing island with air arrivals up 14.5 percent, “and we are confident that the opening of Celebration Cay in Freeport next month will send sea arrivals skyrocketing”.
However, there have been complaints for a long time about the cost of services in hotels in both New Providence and the Family Islands. While the country is beautiful, the people are friendly and the cost of airfare getting to the Bahamas is affordable, most tourists are unhappy with prices of food and services.
The Bahamas is regarded as one of the most expensive destinations in the Caribbean and the Americas. For instance, the cost of a Taxicab from the Airport in Nassau to a Cable Beach Hotel less than eight miles away could be as much as $40. In some hotels, the cost of a regular glass of Coke soda is $10 when VAT and gratuity are added. Costs like these are excessive and simply unreasonable.
While the tourism product is attractive, there is also a need to improve the experience of the visitor to The Bahamas with compelling cultural activities.
Fears of the impact of tariffs might be well placed, but there must be an examination of the overall cost of the tourism product and what could be done to make it less expensive in the national interest.
