The US government is considering slapping up to 100% tariffs on Nicaraguan goods and even withdrawing the country from the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR).
The proposed actions come after the Office of the United States Trade Representative (USTR) determined that Nicaragua’s policies on labour rights, human rights, and the rule of law are “unreasonable” and “burden or restrict US commerce.”
The USTR decided that President Daniel Ortega’s administration’s actions “hinder US trade” due to pervasive abuses and limits on fundamental freedoms.
The agency noted Nicaragua’s deteriorating democratic institutions and widespread violations of internationally recognised labour rights as major concerns.
Tariffs and trade suspension on the table
As part of those options, however, the USTR suggested further tariffs of up to 100% on some or all Nicaraguan goods. These measures were to be implemented immediately, with a 12-month transition period.
The agency also recommended that Nicaragua lose or have its benefits from the CAFTA-DR (Dominican Republic-Central America Free Trade Agreement) agreement suspended or revoked, an arrangement established in 2006 that has led to an explosion in exports of Nicaraguan merchandise to the land of the free.
Washington will decide whether to take the measures it proposed on the next-generation fighters after public comment closes on the actions on November 19.
The report marks a significant increase in economic pressure on Nicaragua that has already faced numerous series of sanctions and diplomatic isolations in the past couple of years.
If enacted, the new measures could attack the core of the export-driven economy.
Ortega’s rule and US scrutiny
Nicaragua has been controlled by President Daniel Ortega and his wife, Vice President Rosario Murillo, since 2007.
Murillo was named “co-president” following a constitutional amendment that strengthened the couple’s position.
The USTR’s investigation into alleged violations by the Ortega-Murillo government began on December 10, 2024, during President Joe Biden’s administration, pursuant to Section 301 of the United States Trade Act of 1974.
During a January 16 hearing, the probe received over 160 public comments and testimony from several witnesses.
Following months of investigation, the USTR decided that the Nicaraguan government “committed or permitted a series of abuses” of labour and human rights, including actions harming US citizens and property.
According to the report, these policies “limit commercial opportunities for US businesses in Nicaragua” and accuse the government of “dismantling the rule of law.”
Economic impact and domestic reaction
Nicaraguan economists and political commentators have warned that the prospective US measures might have a devastating impact on the country’s frail economy.
The United States is Nicaragua’s main export market, absorbing essential exports like raw gold and textiles, both of which would be directly affected by higher tariffs or a suspension from CAFTA-DR.
Economist Juan Sebastián Chamorro, who was deprived of his nationality and banished to Washington after being accused of “treason,” called the USTR report “extremely serious” and warned that the ramifications might be “devastating for the Nicaraguan economy.”
He warned that the potential elimination of CAFTA-DR incentives might substantially discourage foreign investment, forcing businesses to reassess their operations in the face of trade uncertainty.
Chamorro noted that Nicaragua’s reliance on US markets puts it particularly vulnerable to trade reprisal.
He cautioned that withdrawing from CAFTA-DR would not only lower export income but also weaken confidence in Nicaragua as a business-friendly country.
Next steps in Washington
The USTR will now consider public feedback before deciding whether to proceed with the planned actions.
While no final decision date has been established, the procedure represents the most severe challenge yet to Nicaragua’s membership in the regional trade agreement.
If executed, the sanctions have the potential to change economic relations between Washington and Managua, demonstrating that the US is willing to use trade pressure to address human rights and governance breaches in Central America.
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