The Compact of Free Association (COFA) between the United States and the Republic of the Marshall Islands (RMI) has a section on tariffs.
The COFA authorizes the U.S. to place tariffs on items imported from the RMI and even specifies tariffs on some particular goods. For example, tuna is duty free only up to 10% of the amount of tuna consumed in the United States. If the Marshall Islands provide more than 10% of all the tuna eaten in the U.S. in a year, the amount over that 10% will no longer be duty-free. Watches, buttons, and clothing also are not duty free.
Yet President Trump’s new tariffs levy a 10% “reciprocal tariff” on the Marshall Islands, and also on the Federated States of Micronesia, another nation that has signed a COFA with the United States.
Why is there a reciprocal tariff?
The administration appears to be calculating tariffs by the difference in exports relative to imports (net exports) adjusted for exchange rates scaled by the level of imports.
Imports to the U.S. from the Marshall Islands in 2024 totaled $23.19 million dollars, mostly in the form of fish. Micronesia sent $100,000 dollars in exports to the U.S., also mostly in the form of fish. The Federated States of Micronesia have the same clause about tariffs in their COFA with the United States. Both nations import far more from the United States than they export to the United States. The U.S. market for canned tuna is over 3 billion dollars, so neither of the COFA nations has reached the 10% level at which they would expect to pay tariffs.
Palau, the third Freely Associated State (FAS), exported roughly $290,000 worth of goods to the U.S. last year. Like the other COFA nations, the exports were primarily fish. Their COFA contains the same language on tariffs as those of the other COFA nations, down to the specifics on canned fish.
“Reciprocal. That means they do it to us, and we do it to them,” said Trump in a news conference. That suggests that the COFA nations on the reciprocal tariffs chart have 10% tariffs on goods from the United States. In fact, Micronesia’s average tariff on U.S. agricultural goods is 4.5%.
In short, it is unclear why the FAS countries were slapped with tariffs.
The takeaway for Puerto Rico
Puerto Rico, as a territory of the United States, will not face additional tariffs from the United States, though the Island is likely to see consequences of the global tariffs like the rest of the United States. But the experience of the current FAS should be a reminder to supporters of the political status of free association. Freely Associated States are independent nations, and they can face all the same challenges with the U.S. as any other foreign country, including changes in trade regulations.
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