If Puerto Rico were an independent nation or a country in free association with the United States, the new “Reciprocal Tariffs” would add tariffs to exports from Puerto Rico to the United States. Two of the three current free associated states have been slapped with a 10% tariff. As a U.S. territory (and of course this would also be true for a state of Puerto Rico), there is no danger of this.
But Puerto Rico is likely to be affected by the tariffs anyway.
The good
Governor Gonzalez-Colon, a Republican, is leaning into the tariffs. She hopes, as Trump does, that the tariffs will encourage Americans to buy American-made goods. The governor has already started using the hashtag #PuertoRicoMadeIsAmericanMade! and encouraging U.S. corporations to restore their production to Puerto Rico. With a strong history in manufacturing, a large, skilled, bilingual workforce, and a U.S. address, Puerto Rico is the answer for companies that have previously made their products in Mexico or China.
If this approach works, it could bring greater prosperity to the Island.
The bad
Although the president continues to present tariffs as funds that foreign countries pay to the United States, that is not actually how tariffs work. Instead, U.S. companies and consumers pay more for goods with higher tariffs. This will obviously raise prices for imported goods, but it also raises prices for U.S. companies that make products using parts or raw materials or machinery that is imported from other countries. That describes just about all U.S. manufacturers.
Additionally, higher prices for imported goods usually encourage U.S. manufacturers and retailers to raise prices on U.S.-made goods to just a little bit less than the imported goods. If the expected $5,000 to $15,000 price hike on imported cars shows up, U.S.-made cars can raise their prices by $3,000 and still look like a bargain.
Economists expect that even families without plans to buy a new car will see increase of at least $2,000 in their daily expenses over the next year. In Puerto Rico, where nearly half the residents live under the federal poverty line, this will be a severe blow.
The uncertain
Some countries may negotiate a deal with the administration. Some have already levied retaliatory tariffs on U.S. exports, which will of course include exports from Puerto Rico. The president may even change his mind, as he has already done several times on the tariff plans. This uncertainty makes it hard for businesses, agencies, and families in Puerto Rico to make plans, or even basic budgets.
Puerto Rico is already affected by all the decisions made in Washington. We just don’t have a say in most of them. As a state, we would have four Members of Congress and two Senators speaking up for us, rather than just one Resident Commissioner who cannot even vote on bills in Congress. Reach out to your legislators and make sure they know that their constituents support statehood for Puerto Rico.
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