## Long-term Effects of US Tariff Increases on CAPDR

_IMF Working Papers, June 19, 2026_

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## Bibliographic details
- Authors: Alexander Subramaniam Beames
- Published: June 19, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229049276.001

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### Summary overview
- In a series of declarations throughout 2025 and into 2026, the United States announced higher tariffs on nearly all imports from most countries.
- The CAPDR region comprises Costa Rica, Dominican Republic, Guatemala, Honduras, Nicaragua, Panama and El Salvador.
- CAPDR countries are affected through sizeable direct trade linkages with the United States, and through indirect trade linkages with third countries.
- The paper uses a multi-region multi-industry model of the global economy to explore potential long-term economic effects of these tariff increases on CAPDR.
- Ongoing legal challenges introduce additional uncertainty regarding the ultimate extent of tariff changes; the paper’s results remain broadly valid providing the tariffs remain in place.

### Methodology
- Modeling approach: multi-region multi-industry model of the global economy.
- Focus: long-term economic effects on the CAPDR region from US tariff increases announced in 2025 and into 2026.
- Key channels considered: direct export exposure to the United States and indirect trade linkages via third countries.

### Major findings
- CAPDR member countries will experience falls in real GDP to varying degrees.
- The severity of GDP effects is closely linked to direct export exposure to the United States.
- The most vulnerable industries are heavily trade-exposed manufactures.
- Exemptions—most importantly for textiles & apparel—may provide some scope for trade diversion to offset some GDP losses.

### Policy implications and considerations
- Countries with higher direct export exposure to the United States are more vulnerable and may require targeted policy responses.
- Trade diversification and seeking opportunities for trade diversion where exemptions exist (notably textiles & apparel) could mitigate some GDP losses.
- Legal uncertainty over tariff permanence suggests contingency planning for scenarios with tariffs remaining in place.

*Source: Alexander Subramaniam Beames, Long-term Effects of US Tariff Increases on CAPDR, IMF Working Paper No. 2026/125 (June 19, 2026).*

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_Source: https://www.imf.org/en/publications/wp/issues/2026/06/19/long-term-effects-of-us-tariff-increases-on-capdr-577065_