Trembling fir circled by waterbird, island dweller (7)

I believe the answer is:

corfiot

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'island dweller' is the definition.
I don't know anything about this answer so I can't judge whether this works.

'trembling fir circled by waterbird' is the wordplay.
'trembling' indicates anagramming the letters.
'circled by' is an insertion indicator (I've seen this in other clues).
'waterbird' becomes 'coot' (I've seen this before).
'fir' is an anagram of 'rfi'.
'rfi' put into 'coot' is 'CORFIOT'.

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I've seen this clue in The Independent.

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