Trump and the dilemma of CAFTA: the political considerations behind the commercial penalty on Nicaragua
In DIVERGENTES, December 5, 2025
By Wlfredo Miranda Aburto
The US president Donald Trump is evaluating suspending Nicaragua from CAFTA or imposing 100% tariffs within a regional strategy against government allies of potential rivals. The USTR is looking for a measure which would affect the regime without hurting US companies. The decision could be announced on December 19th and would put at risk the principal market for Nicaraguan exports.
The Trump administration is approaching a decision which could completely redefine the economic relations between the United States and Nicaragua: suspending the benefits of CAFTA-DR or imposing punitive tariffs of up to 100% on key export sectors. It is not just a trade policy, but another piece within the geopolitical strategy of the Republican government toward Nicaragua, Venezuela and Cuba, countries which the White House considers under the adverse influence of China, Russia and Iran.
Sources close to Washington consulted by DIVERGENTES agree that the decision could be made known on December 19th, the date on which Trump would renew the declaration which classified Nicaragua as a “singular threat” for US national security.
Trump has a series of measures on the table which go from the partial suspension of tariff benefits to the imposition of punitive tariffs of 100%. According to Manuel Orozco, a researcher at the Interamerican Dialogue, the determination of what to recommend to Trump is left in the hands of the US Trade Representative´s Office, an entity which has evaluated the type of sanction which could more precisely hit the Ortega-Murillo regime and at the same time, cause the least damage possible to US companies that operate in Nicaragua.
Reducing the demand for Nicaraguan products
This calculation starts from a premise: any measure must reduce the demand for Nicaraguan products in the US market. The USTR has studied the suspension of benefits for sectors which have already been affected by similar measures in other countries, especially textiles, automobiles, and electronics.
It has also analyzed the impact on foods like coffee, bananas and meat, even though these generate greater caution, because of the weight that they have on regional commercial chains. Orozco warns that nothing blocks the White House from progressing toward much more drastic measures.
Starting in 2026 the Trump administration could impose 100% tariffs on several sectors, a decision which would de facto expel Nicaragua from its principal export market. The suspension of CAFTA would only be one part of the punishment, accompanied also by foreign policy actions aimed directly against the Ortega government.
But beyond the technical analysis, the decision has a political component that, according to the exiled dissident and political analyst, Eliseo Núñez, is crucial: “Trump looks at Venezuela, Nicaragua and Cuba as one strategy,” he explains. Under that logic, the measures against Managua are not decided only by the behavior of the Ortega-Murillo regime, but by how they fit in a broader design aimed at reducing the influence of China, Russa and Iran in the continent. So, December 19th could be a key date, and according to sources in Washington, the White House would be ready to simultaneously announce the first actions on CAFTA.
Tariffs more harmful than a suspension of CAFTA?
Among the scenarios which circulate is the suspension of Nicaragua from the trade agreement. Even though it seems an extreme measure, Núñez maintains that paradoxically it would be the least damaging for the Nicaraguan economy, when it is compared with the possibility of 100% tariffs, which would have an immediate and devastating impact.
The former deputy also warns about the possible reaction of Ortega to a scenario of increasing pressure. In his analysis, the regime could opt for deliberately worsening the situation to try to force a negotiation with the United States from a more advantageous position. That logic would have the 2027 elections in mind when Ortega aspires to consolidate his political control. If Washington shows itself willing to negotiate without having previously achieved significant changes, Ortega could interpret that he is capable of forcing the United States to dialogue under his terms. The Republican administration, aware of that risk, is trying to avoid any sign that could be read as a concession.
Trump has already used tariffs as an instrument of political and economic pressure with profound effects in several countries. The trade war with China, for example, did not just raise the import taxes on hundreds of products, but modified global supply chains, made inputs more expensive, and provoked reprisals which affected US farmers and manufacturers, consequences which are not expected from a similar measure with Nicaragua, due to the small commercial relationship with the United States in comparison to the Asian giant.
This type of actions was also applied with Mexico, Canada, the European Union and Turkey, generating abrupt assessments, drop in exports, loss of investment and diplomatic tensions which forced many governments to renegotiate agreements under unfavorable conditions. In all cases, the 100% tariffs were the most devastating level, capable of closing markets overnight and disarticulating whole productive sectors.
In the case of Nicaragua, the risk is even greater because its economy has become structurally dependent on CAFTA. The treaty ensured its preferential access to the US market, where it directs more than 60% of its exports, especially textiles, meat, coffee, processed gold, and light manufacturing.
This access has sustained thousands of jobs in free trade zones, allowed the installation of enterprises which operate exclusively for the US market, and has become one of the pillars for the macroeconomic stability of the country.
Losing the benefits of CAFTA, or dealing with tariffs, would be a direct blow to the trade balance, foreign investment, and employment, in a context where alternative markets do not exist capable of absorbing that volume of exports… much less China, the country which the Ortega-Murillos has approached.
The final decision of Trump will combine the technical analysis of the economic effects, internal political expediency, and the geopolitical strategy toward a hemisphere which is under dispute, especially because of the military deployment in the Caribbean which threatens the Chavist dictatorship of Nicolás Maduro.
