Published on March 27, 2025 / Leer en español
In This Issue
When a new president is elected in the United States, their transition team is quickly assembled to propose and implement policies that will define the trajectory of the Administration. The performance of the Administration during its first 100 days has been used since the time of Franklin D. Roosevelt as a benchmark to assess its effectiveness.
Though we have yet to reach the 100-day mark of the second Trump administration, it is no exaggeration to suggest it has already made a significant impact, in less than the average or expected timeframe. Puerto Rico’s history has shown that institutional destruction (or dismantling) is far easier and occurs quite faster than institutional building or rebuilding, a lesson we should remember when comparing the policy proposals of different presidential administrations. Click here to read more on the approaches of previous U.S. administrations towards Puerto Rico.
In this edition of the CNE Review, we examine the impact of the new administration’s policies on Puerto Rico and the U.S. economy. In our Guest Spotlight, as part of a special collaboration with Spain’s esteemed think tank Real Instituto Elcano, we partnered with Carlota GarcĂa Encina, Principal Investigator, to explore the ripple effects across Europe. Finally, we wrap up with a Data Snapshot on tariffs.
Insights + Analysis from CNE
By Sergio M. Marxuach, Policy Director
On January 20, 2025, Donald J. Trump was sworn in as the 47th president of the United States and he and his policies have taken Washington, DC by storm. President Trump has issued (at last count) more than 90 Executive Orders that seek to implement, without Congressional action, any number of unprecedented policies.
Click here for examples of what President Trump’s orders seek.
Impact to Puerto Rico
To the best of our knowledge, no Executive Order has singled out or focused on programs or government funding earmarked specifically for Puerto Rico. However, state and municipal governments, as well as certain NGOs, could be adversely affected to the extent they had already been assigned federal funding for DEI initiatives, green energy projects, or climate change programs, all of which seem to be high on the list of federal programs to be eliminated immediately.
In addition, federal employees working and living in Puerto Rico have been subject to layoffs, just like their counterparts in the U.S. These reductions in federal employment would have an adverse impact on the Puerto Rican economy as well as a negative effect on the availability of certain federal services on the island, depending on the magnitude of the cuts and the specific agencies affected.
Finally, many private sector companies in Puerto Rico receive or are paid with federal funds for goods and services they sell to Puerto Rico state agencies in their role as contractors, suppliers, or merchants. Significant cuts to federal expenditures in Puerto Rico would, therefore, have a direct negative effect on these firms, as well as an indirect impact, to the extent that a reduction in overall economic activity further decreases other demand for these firms’ goods and services.
Looking forward over the next few months, three areas are cause for particular concern:
- Â Ongoing reconstruction efforts
- Education
- Medicaid
Click here to read more on these.
So far, Puerto Rico has avoided the worst effects of President Trump’s policies, in large part because federal courts have temporarily stayed the implementation of many of the recently signed Executive Orders. However, we note that keeping a low profile and hoping for the best is not a strategy. The government of Puerto Rico would be well advised to start thinking about its strategies to curtail the foreseeable economic and social damage that could befall the island during the next three years and ten months.
Guest Spotlight
A European Response
by Carlota GarcĂa Encina, Senior Analyst at Real Instituto Elcano
Donald Trump wants a safe and prosperous United States. These are core interests for any country, and in this regard, the new U.S. president is no different from any of his predecessors or current European leaders. What sets him apart is how he seeks to pursue these interests. Trump shows little regard for values, and his political instincts lean toward isolationism over than international engagement, and protectionism over free trade. As for his approach, he favors deals and transactions over crafting rules, working through international organizations, or traditional diplomacy.
With Trump in the White House and his disruptive approach to global affairs, everything suggests that the U.S. may be undergoing its most significant foreign policy shift since 1945. His second term in office could fundamentally reshape how future generations of American politicians, military leaders, business executives, and citizens interpret the country’s strategic priorities—both domestically and internationally. These priorities increasingly focus on China and the Indo-Pacific region, a trend that has been brewing for years and has bipartisan support in Washington. However, for the first time, the future foundations of U.S.-Europe relations are under debate. For decades, the U.S. invested unprecedented resources and reputation in Europe, motivated by national interest, prosperity, and economic growth, and Europe remains grateful. Yet, the new administration seems willing to abandon that investment and break ties with its European allies.
Data Snapshot
Potatoes and Beer: When Trade Wars Hit Home
By Enrique Figueroa Grillasca, Research Associate
The next four years are expected to be marked by economic uncertainty and shifting trade policies. One key issue is the brewing trade war between the U.S., Canada, and Mexico.
Click here for consumer & producer responses to tariffs.
Puerto Rico imports a significant volume of goods from Canada and Mexico, both as final products for consumption—such as $72 million worth of Canadian potatoes or $26 million worth of beer from Mexico —and as intermediate inputs for local manufacturing, including $24 million in compressors from Mexico.
With Trump in the White House and his disruptive approach to global affairs, everything suggests that the U.S. may be undergoing its most significant foreign policy shift since 1945. His second term in office could fundamentally reshape how future generations of American politicians, military leaders, business executives, and citizens interpret the country’s strategic priorities—both domestically and internationally. These priorities increasingly focus on China and the Indo-Pacific region, a trend that has been brewing for years and has bipartisan support in Washington. However, for the first time, the future foundations of U.S.-Europe relations are under debate. For decades, the U.S. invested unprecedented resources and reputation in Europe, motivated by national interest, prosperity, and economic growth, and Europe remains grateful. Yet, the new administration seems willing to abandon that investment and break ties with its European allies.
Any increase in tariffs will affect the prices of goods, employment, and economic output. However, predicting the precise impact is difficult due to their dependence on consumer and producer responses, which in turn depend on income and price elasticities, the availability of substitute goods, and shifting production strategies.
However, these tariffs, if they become permanent, would mark a major shift in U.S. economic policy, and will have global consequences. The ultimate effects, though, will depend on the final policies adopted by all countries involved and how markets adapt in response.