On Thursday, White House spokesman Sean Spicer said that President Trump was considering a 20% tax on Mexican imports to pay for the border wall he promised during the campaign.
“When you look at the plan that’s taking shape now, using comprehensive tax reform as a means to tax imports from countries that we have a trade deficit from, like Mexico,” Spicer said on the flight back from Philadelphia, where Trump addressed congressional Republicans at their annual retreat. “If you tax that $50 billion at 20 percent of imports — which is by the way a practice that 160 other countries do — right now our country’s policy is to tax exports and let imports flow freely in, which is ridiculous. By doing it, that we can do $10 billion a year and easily pay for the wall just through that mechanism alone. That’s really going to provide the funding.”
But later, Spicer appeared to walk back those comments, saying that the 20% tax is just one of many options being considered:
Hours later, amid an uproar from lawmakers on both sides of the aisle, Spicer said that he was simply putting forward one idea Trump is considering to show how the administration could fund the multibillion-dollar construction of a wall on the US’s southern border. Spicer repeatedly said the White House was aiming to be “illustrative” rather than “prescriptive” as he walked back the more definitive comments he made earlier Thursday.
White House chief of staff Reince Priebus also told reporters the White House is considering a “buffet of options” as it considers how to pay for the border wall.
Mexican exports to the U.S. totaled $295 billion, while imports from the U.S. were $236 billion, making them our third largest trading partner. The leading products Mexico exports to the U.S. are vehicles and electrical machinery. We’re running a trade deficit of around $58 billion, which has been getting larger in recent years.
But the flip side of the equation is U.S. exports to Mexico. Mexico is the third largest market for our agricultural products, and Trump’s talk of a large tariff and the possibility of retaliation by Mexico has farm-state lawmakers worried.
Tariffs are not unknown in the world, and poorer countries can be very protectionist when it comes to some of their industries. But a 20% tariff or “border tax” would mean a trade war with Mexico. The negative impact on the American economy would be substantial, which is why I think Trump will dial back the border-tax proposal and look for other ways to pay for the wall.