Version 1.0 — Published April 3, 2026  |  Reviewed quarterly by the JBM editorial team

The Numbers Puerto Rico Business Owners Need to Know

The tariff landscape in 2026 is not a passing disruption — it is a structural cost increase that demands a permanent adjustment to how businesses price, source, and project cash flow.

According to analysis by Boston Consulting Group, the most affected sectors by aggregate dollar impact are:

1. Automobile and auto parts imports — over $400 million in projected cost increases, driven by the 25% tariff on vehicles manufactured in Mexico and tariffs on parts from China and South Korea.
2. Agricultural products and food distribution — meats, fruits, and vegetables sourced from tariffed countries face direct cost escalation. Puerto Rico imports significant food volumes from Nicaragua, El Salvador, Peru, and Chile.
3. Electrical machinery and electronics — components and finished goods from China now carry tariffs exceeding 145% in some categories, affecting any business in consumer electronics, industrial equipment, or telecommunications.
4. Construction materials — lumber, steel, and aluminum from Canada and Mexico carry a 25% tariff, directly impacting ongoing reconstruction projects funded by federal disaster recovery appropriations.
5. Retail and apparel — clothing and footwear imported from Asian countries at various tariff levels, with the highest rates applied to China-origin goods.

It is important to note that pharmaceutical products — Puerto Rico’s largest export sector, representing nearly 20% of U.S. pharmaceutical manufacturing exports — remain exempt from the current tariff structure.

How Tariffs Actually Hit Your Business: The Transmission Mechanism

Understanding how tariff costs flow through a supply chain is essential for calculating your real exposure. Not every business is affected in the same way or at the same time.

Channel 1: Direct Import Cost Increase

If your business imports goods directly from tariffed countries, the tariff is applied at the port of entry and represents an immediate cost increase on each unit imported. This is the most straightforward and immediately measurable impact.

Channel 2: Distributor Pass-Through

If you purchase from a domestic distributor who imports from tariffed countries, the tariff cost will eventually be passed through in the form of higher wholesale prices. Businesses that locked in annual pricing agreements before tariff implementation may have a temporary buffer — but that buffer erodes at contract renewal.

Channel 3: Competing-Product Price Inflation

Even if you source exclusively from the continental United States, tariffs affect your pricing environment. As economist Argeo Quiñones (University of Puerto Rico) explained: if a domestic producer competes with a Chinese product whose price rises due to tariffs, that producer now has space to raise its own price while remaining cheaper than the import.

Channel 4: The Jones Act Compounding Factor

The Merchant Marine Act of 1920 (Jones Act) requires all maritime shipments between U.S. ports to use U.S.-flagged vessels. This already adds a structural cost premium to goods shipped from the continental U.S. to Puerto Rico. The combined effect — Jones Act shipping premiums plus new tariffs on international goods — creates a double cost pressure unique to Puerto Rico among all U.S. jurisdictions.

The 5-Step Framework to Calculate Your Business’s Tariff Exposure

JBM has developed a practical framework that any business owner can apply to quantify the real impact of 2026 tariffs on their operation. This is the same analysis our advisory team runs for clients before recommending any pricing or sourcing adjustment.

1. Map Every Imported Input and Product

   Start with your accounts payable and inventory records. Identify every supplier from whom you purchase goods originating outside the United States. For each supplier, determine the country of origin — not just the country of the supplier, but where the goods were manufactured. A U.S. distributor may sell Chinese-made goods.

2. Apply the Applicable Tariff Rate by Country and Category

   China-origin goods carry the highest rates (25% to over 145% on specific categories). Mexico and Canada face 25% on most goods. A broad 10% tariff applies to most other countries. Your CPA or customs broker can help identify the precise Harmonized Tariff Schedule (HTS) code and applicable rate for each product.

3. Calculate the Total Annual Cost Increase

   Multiply your annual spend per product category by the applicable tariff rate. Sum across all categories to arrive at a total annual tariff exposure figure. This is the amount by which your COGS will increase if you make no sourcing changes and your suppliers pass through the full tariff cost.

4. Compare to Your Gross Margin

   Divide your total tariff exposure by your annual gross profit. This percentage tells you how much of your gross margin is at risk. A business with $200,000 in gross profit and $40,000 in tariff exposure has 20% of its margin at risk — a material threat requiring immediate action.

5. Model the Breakeven Price Adjustment

   Determine what price increase across your product or service mix would fully offset the tariff cost increase, assuming no change in volume. Then model whether that increase is realistic given your competitive environment and customer price sensitivity.

Sector-Specific Considerations for Puerto Rico Businesses

Retail and Consumer Goods

Smaller retailers lack the purchasing volume to negotiate supplier price protections. Audit inventory turnover by product category and prioritize tariff-adjustment decisions on SKUs that represent the highest share of COGS. Blanket price increases without category-level analysis risk losing volume in price-sensitive categories while leaving margin on the table elsewhere.

Food Service and Restaurants

Restaurants importing wines, spirits, and food ingredients face cost increases that are particularly difficult to pass through in competitive markets. A 3% overall price increase on a menu driven by a 15% cost increase in specific categories will not restore margins. Category-specific analysis is essential.

Construction and Real Estate Development

Steel, aluminum, and lumber from Canada and Mexico carry 25% tariffs and represent a significant share of total project cost. For projects currently under fixed-price contracts, this creates a serious risk of cost overruns. Contractors and developers should review all active contracts for material cost escalation clauses and, where absent, initiate renegotiation.

Professional Services and Individuals

Professionals and individuals are affected through higher consumer prices (compressing real purchasing power) and higher input costs if their practice uses imported equipment or technology. For individuals with investment portfolios, the tariff environment adds inflation risk to fixed-income positions and introduces volatility in trade-sensitive equity holdings.

The Strategic Opportunity: What the Tariff War Creates for Puerto Rico

Manufacturing Reshoring

Puerto Rico’s government has identified between 75 and 100 international companies — primarily in aerospace, pharmaceutical manufacturing, and medical devices — evaluating potential relocation of production facilities to the island. Goods manufactured here can be sold across the United States without tariff barriers, while avoiding higher labor and real estate costs of the continental U.S.

Import Substitution

Developing domestic production capacity in categories where imports have become uncompetitively expensive is a medium-term strategic response. Businesses in food production, light manufacturing, and consumer goods assembly are positioned to evaluate viability.

Competitive Repricing Against Imports

Businesses that produce locally or source from non-tariffed countries have a window to capture market share from competitors whose cost structure is more import-dependent. This opportunity is time-sensitive: it exists as long as the tariff environment persists and requires real-time visibility into your cost position relative to competitors.

What Your Financial Advisory Team Should Be Doing Right Now

• Quarterly COGS analysis: Identifying cost increases attributable to tariffs versus other inflationary factors, and tracking margin trajectory quarter over quarter.
• Cash flow scenario modeling: Building 90-day and 12-month cash flow projections under different tariff scenarios.
• Contract review: Auditing active supplier contracts for price escalation provisions and flagging renewals where renegotiation is warranted.
• Pricing strategy support: Providing the financial data needed to support pricing decisions, including breakeven analysis and volume sensitivity modeling.
• Tax planning under the new cost structure: Ensuring increased COGS are properly documented and any available deductions or credits are captured.