The trade war between the U.S. and China will mean a shift in the structure and dynamics of prices, including costlier construction costs, and increased risks of a delayed economic recovery, according to an analysis published by the H. Calero Consulting firm.
In the latest edition of its “Pulse” publication, the firm says the spat between the two world powers can “jeopardize the viability of recently renegotiated debt repayments. These risks imply that economic policy will need to be flexible so as not to be caught off guard once again.”
As of Fiscal 2018, Puerto Rico had a $58 million trade surplus with China, mostly $284 million on exports of cardiovascular medications and imports of chemicals, clothing, and electronics.
“U.S. and Puerto Rico consumers ultimately face the costs of these tariffs. Several retail companies have warned that prices would increase, especially for Chinese products,” the study concluded.
“Tariffs on steel and aluminum will raise construction costs and further slow Puerto Rico’s reconstruction efforts,” it further noted.
Overall, Puerto Rico will see a realignment of the pricing structure, with increases across the board on goods that are affected by tariffs, such as construction-related materials.
“Higher costs and slow disbursement of federal funds could be a devastating combination for the local economy,” H. Calero Consulting said.
The Federal Emergency Management Agency has estimated it will spend more than $9 billion in post-Hurricane María recovery funding this fiscal year, of which about half have already been disbursed.
The risk of a slow recovery could lead to lackluster economic performance that jeopardizes the repayment schedule for the recently renegotiated debt.
“Should it actually take place, it would materialize our worst-case scenario with more negative real growth. To counter this, Puerto Rico must ensure that economic development, growth, and now resilience, remain top priorities. Otherwise, we could face a second crisis on the fresh footprints of the first one,” H. Calero Consulting concluded.