As the Strait of Hormuz is once again being used as a negotiating tool and is facing disruptions, policymakers are being reminded that countries situated along critical maritime routes possess influence extending far beyond their economic size. Their location allows them to shape trade flows, energy markets, and diplomatic calculations. The significance of geography, once thought to have been diminished by globalization, has returned to the center of international economics.
As Napoleon is often credited with observing, “The policy of a state lies in its geography.” The Dominican Republic, however, faces a unique equation. Rather than being forced to choose among competing economic centers, it occupies a position that allows it to engage with all of them simultaneously. Its strategic location, combined with an unusually broad network of preferential trade agreements, places the country at the intersection of the emerging global trade system.
The Dominican Republic is the only country in the Western Hemisphere with simultaneous preferential access to the United States through the Dominican Republic–Central America Free Trade Agreement (DR-CAFTA), to the European Union through the CARIFORUM-EU Economic Partnership Agreement, and to the Caribbean through its Free Trade Agreement with CARICOM. This is more than a collection of trade agreements. It is a structural competitive advantage that few economies contain.
The United States’ recent trade policy reinforces the value of that position. As tariffs increase and companies reassess the resilience of their global supply chains, nearshoring has evolved from a business trend into a strategic necessity. The Dominican Republic offers a combination that few jurisdictions can match: preferential access to the U.S. market, geographic proximity, competitive labor costs, an established free-zone ecosystem, and macroeconomic stability. For sectors such as medical devices, advanced manufacturing, logistics, and agro-industry, the country’s value proposition has become significantly stronger.
Recent developments in North America have further strengthened that proposition. On July 1, 2026, the United States announced that it would not renew the U.S.-Mexico-Canada Agreement (USMCA) during its scheduled six-year review. Although the agreement remains in force until 2036, its future will now be subject to annual political review, creating greater uncertainty for investors operating in North America.
The contrast with the Dominican Republic is stark. DR-CAFTA contains neither a sunset clause nor a periodic renewal mechanism. Its preferential access to the U.S. market remains institutionalized and predictable. At a moment when firms with operations in Mexico must account for political uncertainty, the Dominican Republic can offer stability. Companies reassessing their North American manufacturing footprint should therefore be a priority for the country’s investment promotion strategy.
At the same time, the Economic Partnership Agreement (EPA) with the European Union provides the DR access to a market of more than 450 million consumers with high purchasing power. The Dominican Republic is already the European Union’s largest trading partner in the Caribbean, accounting for roughly 22 percent of total EU-CARIFORUM trade. The next challenge for the country is to move beyond primary exports toward higher-value products capable of meeting Europe’s increasingly demanding standards on traceability and sustainability. Within the Caribbean, meanwhile, the Dominican Republic is well positioned to consolidate itself as the region’s principal logistics, distribution, and re-export platform.
China represents a different dimension of the country’s external strategy. Since establishing diplomatic relations in 2018, China has become the Dominican Republic’s second-largest trading partner, although the commercial relationship remains heavily tilted in Beijing’s favor. There is room to expand Dominican exports, including cigars, cacao, medical devices, and other high-value goods, and to attract productive investment. Yet this relationship requires careful management. One of Washington’s principal concerns during the USMCA review was the transshipment of Chinese goods through North America. If the Dominican Republic were ever perceived as serving a similar function, DR-CAFTA could face greater scrutiny. The country can and should deepen trade with China, but it cannot afford to become a platform for circumventing U.S. trade policy. Robust enforcement of rules of origin should therefore be viewed not as a regulatory burden but as a strategic asset, reinforcing the Dominican Republic’s reputation as a trusted production platform.
None of these opportunities will materialize without dedicated effort. Electricity costs remain among the highest in the region, domestic supplier networks remain underdeveloped, and shortages of skilled technical labor continue to constrain industrial expansion. Geography creates opportunity; policy determines whether that opportunity is realized.
The next two years therefore represent a critical window for action, particularly in five arenas:
- First, the government of the Dominican Republic should launch a targeted investment attraction strategy focused on manufacturers exposed to uncertainty under USMCA, combining proactive economic diplomacy with company-specific relocation proposals anchored in DR-CAFTA’s stability.
- Second, it should establish a dedicated program to increase utilization of the Economic Partnership Agreement with the European Union by helping exporters finance certifications and comply with European regulatory standards.
- Third, reducing industrial electricity costs should become a national competitiveness priority through accelerated renewable energy procurement and expanded access to direct power purchase agreements.
- Fourth, technical education should be aligned with announced investments, ensuring that workforce development responds directly to industry demand.
- Finally, the Dominican Republic should implement one of the hemisphere’s most rigorous rules-of-origin and anti-transshipment regimes, supported by digital traceability, customs cooperation with the United States, and a permanent economic diplomacy unit responsible for protecting and expanding the country’s preferential market access.
The emerging trade order will reward countries that combine market access with predictability, diversification with credibility, and geography with sound economic policy. Few countries are as well positioned as the Dominican Republic. Its location cannot be replicated, and its network of preferential agreements cannot easily be matched. Whether those advantages become the foundation of the country’s next stage of development or remain an underutilized strategic asset will depend not on geography alone, but on the policy choices made today.
Jean Marco Pou is a fellow at Global Americans and a lawyer specializing in economic law, public policy, and international business.
Manuel García Berges is an economist and political scientist specializing in financial markets, currently working as an FX Trader at Primma Valores.
Photo via Universidad de Navarra.
