A U.S. Trade Representative’s office (USTR) report alleges that the Nicaraguan government violates labor regulations, including “allowing use of child and forced labor, human trafficking, repression of freedom of association and collective bargaining.” Washington is using these allegations to threaten punitive measures, including 100% tariffs on goods imported from Nicaragua and suspension of all benefits for Nicaragua from the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR).

The USTR report’s allegations are opaque: most are cut and pasted from reports by the U.S. State Department and U.S. Department of Labor, which do not cite their sources, or from paid mouthpieces such as Manuel Orozco and Expediente Abierto.

According to the Nicaraguan Ministry of Labor, between January 2007 and December 2023, Nicaragua increased child labor inspections by 4600%, and 70,452 companies signed commitments to use no child labor and to respect the rights of adolescent workers. During that same period, 1,636 new unions were formed, making the total number of workers now affiliated in unions 1.2 million, or 38% of Nicaragua’s total labor force. There was a 300% increase in workplace labor inspections and 138,374 women who were working for less than minimum wage had their salaries raised to the minimum. In total, the government accompanied workers in filing successful claims against their employers that resulted in US$8.8 million in claims for workers. There have been 3,010 sessions of tripartite labor negotiations among government, businesses and unions, and the minimum wage has increased 550% over 17 years.

For some time, the U.S. has been engaged in hybrid warfare against the revolutionary governments of Venezuela, Nicaragua and Cuba. To date, U.S. sanctions against Nicaragua are more limited than the other two countries, in part because Nicaragua’s participation in CAFTA-DR makes imposing unilateral trade sanctions more complicated. In fact, even the 18% tariff imposed on Nicaraguan goods earlier this year. is questionably legal under CAFTA-DR rules.

While CAFTA-DR has modestly increased Nicaragua’s trade flows, those who benefited most are small producers who have been able to leverage the free trade agreement to access long-term purchasing agreements in direct partnership with U.S. markets. This has allowed farmers to negotiate a credit component into contracts to invest in adding value to their product. By purchasing machinery to process and package their own product, farmers and co-ops can cut out intermediaries, leaving more profits in the pockets of producers.

The FSLN returned to power in Nicaragua in 2007, shortly after CAFTA-DR went into effect, and its efforts combined with CAFTA-DR benefits, have turned around small-scale production in the country. The Sandinista government designed its national development plan with poverty reduction at its center, and rolled out programs based on a trickle-up economic philosophy that focused on strengthening rural and creative economies with micro and small businesses and co-ops. Over 18 years, the country has worked to improve stability, quality and profit margins for those at the bottom of the production chain including training 95,000 farmers annually in value added products, building 800 new centers of crop collection and processing for coffee and cacao, and financing 19 agro-industrial processing centers.

While U.S. companies in Nicaragua rely on U.S. markets, Nicaraguan companies are poised to pivot to other markets. Over the past 18 years, Nicaragua has embraced a strategy of diversifying markets and as a result, the country is no longer dependent solely on the U.S. for selling its products. For example, in recent years, Panama has surpassed the U.S. as the leading investor in the country, and Nicaragua’s free trade agreement with China led to 218.3% increase in exports to China in its first year of implementation in 2024.

While René Gaitan and I are discussing strategies for selling El Porvenir coffee without being subject to 100% tariffs, 130 km away in Waswalí, Matagalpa, Nicaraguan Co-Minister of Foreign Affairs Valrack Jaentschke was speaking at ceremonies marking the opening of the coffee harvest. In his remarks, Jaentschke noted that the U.S. is not the only market for coffee – this year, Nicaragua’s US$1.3 billion coffee harvest will be exported to 55 different countries. He also addressed the punitive trade measures threatened by the U.S: