Was an Import Tax the Best That Trump Could Come Up With After a Year?
After the Mexican President backed out of a meeting with President Trump over the wall, Trump retaliated by saying he would impose a 20% tariff, to pay for the wall. Then Press Secretary Sean Spicer argued that a 20% tax on $50 billion of imports would give them $10 billion a year. One problem is, these numbers are really wrong! Almost finally, they said this was just among other suggestions. Others said that Congress would back this. Then,they seemed to say we weren’t going to do it. We await Trump’s usual doubling down. I may have mixed up the order of these news clips from independent sources. I was just constructing them in a way to make a sensible story. Obviously, sensibility wasn’t the order of the day.
It’s obvious that American consumers of Mexican produced cars, foods, and liquors, etc. would be directly paying the price. This was all Trump could come up with in a year of guarding his secret plan? These are fundamental goods, and taxing them is then a tax on the common man, or a regressive tax.
Let’s look at the real numbers. I wrote an article on Nov. 17 on the “A Background of US Trade Compared to Our GDP”. Our top import sources are China ($467 Billion), the EU ($418 Billion), Canada ($348 Billion), and Mexico ($294 Billion). So 20% of about $300 Billion for Mexico is $60 billion. Sean Spicer was only off by a factor of 6, stretching it even for Trump’s “alternative facts” world.
Of Mexico’s $294 billion of our imports, $74 billion were vehicles and $63 billion were electrical machinery. There are also food imports, but reporters seem to focus on tequila for some reason.
The cost of the wall they quote as $8 billion to $14 billion. An independent estimate said it could be as much as $25 billion. So $60 billion a year for say a $12 billion dollar wall will pay for it in about two months. However, with Congressional approval of funding, public domain seizures and court cases, planning, cement production, public backlash in US states bordering Mexico, flood diversion projects, endangered species, etc., it will take a long time to complete. If they really had a 20% import tax, it would easily pay smugglers to tunnel under the wall, probably for a few thousand or tens of thousands of dollars.
There is one place that a $54 billion could come in, and that is our trade deficit with Mexico. But it’s not clear how you tax the trade deficit, except with an overall, say, 3.5% tax on imports. Not quite as impressive as the 35% or 45% numbers that Trump bragged about during his campaign, or the latest 20% figment of the imagination.
Trump has not grown up in a border state with Mexico, nor has he lived in one, except atop his Golden Trump Tower in Las Vegas, still not near the border. He doesn’t know that we took California and Texas from Mexico. He didn’t learn Spanish in high school or before, or travel in Mexico. He doesn’t live his life surrounded by Latinos. He doesn’t live where many streets and ranches have Spanish names. He only sees those that are maids in his towers. He doesn’t know the family ties that are across the border, and which started generations ago. A border wall here and massive deportations, would be like blocking the bridges between Manhatten and his Queens birthplace and the Bronx, and deporting Trump back to his Queens.