The Virgin Islands will likely feel blowback from recent turmoil on Wall Street sparked by United States President Donald Trump’s trade wars, experts have warned.
Ahead of a threatened wave of new levies to be imposed on a range of US imports from April 2, stocks tumbled last week, provoking predictions of a looming American recession among some analysts.
Though the situation has since stabilised, last week saw the S&P 500, an index of the leading 500 publicly traded companies in the US, drop more than 10 percent from its February high.
Robert Briant, partner and head of VI corporate practice at Conyers, said the territory cannot be immune from what happens on Wall Street.
“The BVI is heavily dependent on a successful global economy, and to the extent tariffs or any other changes have a significant lasting negative effect on the global economy, then this will have a negative effect on the BVI,” he said.
Still, he added, the current turmoil may not last long.
“The fall in the S&P 500 is worrying, but it is just one indicia of economic activity and could easily recover,” he said. “As such, I am afraid that it is just too early to tell.”
Boost outweighed?
Meanwhile, he said, any boost the VI may receive from longer-term global troubles would likely be outweighed by negative impacts.
“If there is a decline in the global economy, then there may be a slight bump from persons looking for the legal certainty and reliability of a jurisdiction like BVI in a time of turmoil, but this bump will be overwhelmed by the decline in economic activity generally,” Mr. Briant said.
VI-based asset recovery lawyer Martin Kenney agreed that falling share prices in the US could hit the territory hard.
“A bear market is never good for capital investment and economic growth,” he said. “The health of the world’s economy is fragile right now. It depends a great deal on the perception of stability; the rule of law; and the absence of uncertainty caused by the chaos flowing currently like a fire hose from the White House.”
Watching closely
Chamber of Commerce Chairwoman Shaina Smith-Archer said VI businesses are watching the situation closely.
“People are definitely monitoring what’s happening,” she said. “Based on any price changes that they see, they are figuring out how to make adjustments to the supply chain.”
Opposition Leader Ronnie Skelton said he is concerned about food prices for goods not grown in the US.
“If you just take the food market, the majority of it — the fruits and vegetables — is imported into the US and then sent to us,” he said.
Mr. Kenney noted that food grown in the US should not be impacted, but cars and products like cell phones, which often criss-cross borders in their manufacturing trail, will likely see price hikes here.
However, he also suggested that one of Mr. Trump’s latest threats — to impose 200 percent tariffs on alcohol products imported from the European Union — could help the VI tourist trade.
“In general, our alcohol comes from its source: Accordingly, we should not be affected by Trump’s 200-percent tariff on French wines per se,” he said. “In fact, our tourism operators should make this point: In the BVI, a bottle of Sancerre vin blanc or Bordeaux vin rouge will be 200 percent cheaper than in the USVI.”
Despite the concerns, Messrs. Kenney and Briant agreed that the VI’s financial services and tourism industries probably won’t be directly hit by the tariff regime.
“The US tariffs are imposed on goods entering the USA at the port of entry: Financial services are provided in the BVI and are not exported to the USA, and as such the US tariffs should not directly affect financial services,” Mr. Briant explained.
Mr. Kenney, though, said the tourism trade could be impacted indirectly if the trade war hits consumer spending in major economies.
“There could be an indirectly adverse effect on BVI tourism, which is tied to affluence and success in the US and other major economies,” he said. “If the US and world economies fall into recession because of Trump’s tariffs, we will all be affected by that.”
