QCOSTARICA — In recent days, the dollar exchange began to suffer the effects of United States President Donald Trump’s decision to impose tariffs on the entire world, including Costa Rica, with a 10% tax on all U.S. exports.
In the last week, the dollar exchange rose ¢7 colones, and although everyone would think it was temporary, the truth is that an upward trend is expected.
According to experts, this is a moderate increase, so the exchange rate increase would not be significant.
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The tariffs will lead to higher inflation in the United States and, with it, very little chance of the Federal Reserve lowering interest rates. Americans will, therefore, limit their consumption, which could have negative effects on tourism and the purchase of goods and services.
If the forecast is correct, fewer dollars would enter the Costa Rican market, driving an increase in costs, especially considering that the United States is Costa Rica’s main trading partner.
Furthermore, foreign direct investment (FDI) from the United States to Costa Rica and the rest of the world would also be limited by Trump’s own actions.
Another factor that could limit the amount of dollars in Costa Rica has to do with the global impact of raw materials, as the price of products from countries involved in this tariff war could increase, and it remains to be seen what will happen to the price of oil.
This week alone, the cost of crude oil fell 2%, with the U.S. benchmark falling below US$60 a barrel for the first time since 2021, due to the increase in supply announced by OPEC and price cuts by Saudi Arabia.
The fall in oil prices has caused oil company stocks to decline, and multilateral banks have cut their forecasts.
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This would undoubtedly affect the dollar exchange rate, as Costa Rica would have to spend more dollars on its oil bill.
The dollar could weaken due to geopolitical retaliation or the decision by other countries to impose their own tariffs on U.S. products. This could reduce exports, harming employment and production.
“It would be good if the dollar rose in Costa Rica because that would make exports more competitive, weighing the issue of tariffs on the primary sector (coffee, bananas, pineapple, and sugar, which could be affected). But if we’re talking very carefully, it could reduce the flow of money to Costa Rica, and that could reverse the exchange rate trend somewhat since Costa Rica is awash in dollars and the exchange rate doesn’t tend to rise dramatically. Therefore, the impact would not be felt until the second half of the year,” explained financial analyst Daniel Suchar.
“Donald Trump’s announcement will lead to a drop in exports and less tourism, so it’s safe to say that the price of the dollar will rise in the second half of the year. In principle, when there is uncertainty, there is greater demand for dollars in Costa Rica. People tend to protect their investments by buying dollars, which are considered a safe haven asset,” said Karla Arguedas, General Manager at Prival SAFI.
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“The exchange rate could soon reach levels close to ¢520,” added Arguedas.
“The exchange rate will increase slightly, but not much. We’re talking about a lower supply of dollars from exports. But even so, I don’t think the volume will be significant enough to make the excess dollars in the country disappear. The impact this will have is actually very small,” according to Gerardo Corrales Economist atEconomía Hoy
The consequences for the economy have a lot to do with the decisions made by the U.S. Federal Reserve. If it decides to lower interest rates, that could have a direct effect on local interest rates and the exchange rate.
Tariffs Deal a Direct Blow to the Economy
The main effects in Costa Rica will be:
- Fewer Exports. Trade restrictions will limit the inflow of foreign currency from coffee, bananas, pineapple, and sugar, key sectors of foreign trade.
- Tourism at Risk. With a more cautious U.S. consumer, tourist arrivals could decline, affecting one of the country’s main sources of dollars.
- Foreign Investment on Hold. Slower global momentum could slow the flow of US capital to Costa Rica, especially outside of free trade zones.
- Increased Pressure on the Exchange Rate. Fewer available dollars could lead to an upward trend in the exchange rate, affecting import costs and the oil bill.
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