Cayman businesses are scrambling to blunt the impact of US tariffs, shifting supply chains and exploiting trade rules to keep costs under control in a highly import-dependent economy.
With more than four-fifths of Cayman’s goods funnelled through US ports, businesses face mounting pressure to protect margins without passing higher prices onto consumers.
A system of workarounds
Wholesale and distribution company Progressive Distributors told the Compass that it was leveraging a free trade zone in Miami, in addition to a bonded warehouse, while also exploring new, tariff-free sourcing options across the Caribbean, in order to get around tariff-related price increases.
Economist Marla Dukharan said US foreign trade zones are one of the most effective buffers. These zones allow goods to move in and out of the country duty-free, as long as they are not consumed domestically.
“Free zones have the tax and physical warehousing configuration to bring things into the US and ship them back out without paying US duties once the goods are not being used in the US,” she explained.
“There are free zones all over the US – particularly in Florida – and in countries such as Panama,” she said, highlighting that many shipments coming from China enter the Panama free zone, where they are often unpacked and repackaged and shipped elsewhere.
“If Cayman importers use suppliers with free zone access, they could be largely unaffected by tariffs,” she said.
Pamela Coke-Hamilton, executive director of the International Trade Centre, urged businesses to explore alternative supply channels, noting that trade agreements could offer duty-free access for certain imports.
Property developer NCB Group said it has been researching alternate supply routes and suppliers in different jurisdictions and has found that routing through Jamaica is a useful workaround.
“Most products shipped from Asia and Europe are routed either through Miami or Jamaica, as they do not come directly to the Cayman Islands,” said NCB quantity surveyor Megan De Freitas.
“Routing through Jamaica appears to be a more favourable option, as it would not be susceptible to tariffs, though it does increase overall lead times since containers are often delayed there and not as readily available through that route.”
MGJ Motorsport, a high-end European auto repair and performance shop, is diversifying suppliers and holding larger inventories. Furniture retailer Office Furniture Ltd. is bypassing US tariffs altogether by shipping directly from China through Jamaica.
Coke-Hamilton noted that businesses like MGJ Motorsport, which source from Europe, could benefit from the CARIFORUM–EU Economic Partnership Agreement, a trade and development pact that offers duty-free access for select goods.
Although Cayman is not a CARIFORUM member, companies can still take advantage of the agreement by shipping through Jamaica, which is a signatory.
The Chamber of Commerce said the way forward is diversification – finding suppliers beyond the US, collaborating on purchasing and improving regional shipping.
Members have also called for stronger advocacy with the US and CARICOM, duty concessions on essential goods, better access to import data and practical support in sourcing new suppliers. One member even suggested bringing in ships directly from China.
On a macro-level, Coke-Hamilton has advised that regions like CARICOM, of which Cayman is an associate member, should strengthen regional value chains. She stressed that the stability of small businesses needs to be made a priority.
An indirect hit to the Cayman economy
Analysts warn that the tariffs won’t just raise costs but could also hit Cayman’s tourism industry by slowing growth in the United States, its biggest source market. NCB Capital Markets projects Cayman’s GDP growth will ease from 2.6% to 2.5% in 2025, while inflation is expected to climb to 3.5% as higher import costs ripple through the economy.
“Rising US import tariffs will increase US inflation, particularly for goods subject to the highest tariffs, such as steel and aluminium,” NCB Capital Markets noted.
“This will raise import costs for Cayman businesses, pushing up prices for construction materials, food and household goods.”
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