Washington — President Donald Trump is promising Mexico will pay
for his massive border wall. On Thursday, his administration finally suggested
how: a 20% tax on products imported from south of the border.
measure could be part of a comprehensive tax reform package that Trump and
Congress will work out, the White House said. But there was great ambiguity
about the proposal. White House officials later clarified that the tax was but
one possible way Trump could finance the wall.
left unanswered. Would Mexico be footing the bill or American consumers? What
items would become more expensive? Is this even legal?
the details Trump's proposal still has to work out:
Is it a tax, a tariff or something else?
White House said Congress' tax overhaul would place a 20% tax on imports from
any country enjoying a trade surplus with the United States. In other words,
countries selling more goods and service to the US than buying from it. The
idea is to rebalance the playing field for US companies by discouraging
Americans from importing.
appears to overlap with a plan House Republicans are pushing called
"border adjustment". Under this plan, the US would refrain from
taxing American companies' exports but
would tax imports.
revenues are projected to top $1 trillion over a decade. The money had been
envisioned as an offset for lowering US corporate income tax rates, though
House Republicans say it could also pay for a wall.
however, recently said he didn't like the "border adjustment" idea.
What does this mean for Americans?
Mexican products would become more expensive.
means pricier tequila, but also things Americans need: cars, eyeglasses and
many basic groceries.
Camry? About $1 000 more, according to Jim Lentz, CEO of Toyota North America,
noting that a quarter of the car's parts are imported.
are behind the House plan because it would reduce their taxes.
the flip side: Importers, including big retailers and consumer electronics
firms, say the higher prices for Mexican products could hurt sales. And that
means American jobs.
such as Wal-Mart also could face higher tax burdens.
Would Mexico really be paying?
could recoup some of the wall's costs by changing the tax and trade policies
with Mexico. But the money wouldn't necessarily be coming from Mexican taxpayers
or the Mexican government.
the tax would land first on companies exporting from Mexico, the costs would
likely be passed on to consumers. That leaves Americans footing much of the
has said he's OK with being "reimbursed" at a later point because he
is keen to start building the wall immediately.
Would it raise enough money to pay for the
estimates put the wall's cost at up to $15 billion.
Republicans expect their plan to pull in much more than that in its first year.
They say that could easily cover the costs of the wall.
Is it legal?
To be determined.
has a range of obligations under the North American Free Trade Agreement and at
the World Trade Organization. And Mexico is likely to challenge any new tax
that penalises its economy.
has said he plans to renegotiate NAFTA. Mexico, however, is under no obligation
to soften the agreement for his sake.
countries may also object if their
products and services are targeted.
chief economist at Moody's Analytics, said the border adjustment is essentially
a tariff that would be struck down by the WTO if it targets Mexico.
How would this affect the economy?
A topic of great dispute.
White House said the plan would increase US wages, help US businesses and
consumers, and deliver "huge economic benefits." With so much of the
plan ill-defined, it's impossible to substantiate those claims.
turbulence in the US-Mexican trade relationship could have implications for the
is the second-largest exporter to the United States, after China. The United
States imported roughly $271 billion of goods from Mexico during the first 11
months of 2016, according to the Commerce Department, and ran a trade deficit
of almost $60 billion.
Do Republicans like Trump’s plan?
Not all of them.
Amash of Michigan said on Twitter it would be a "tax on Americans to pay
for the wall". Senator Lindsey Graham of South Carolina said he was
"mucho sad" and that "any policy proposal which drives up costs
of Corona, tequila or margaritas is a big-time bad idea".
Trump's pick for commerce secretary, Wilbur Ross, dismissed the idea of using
tariffs as a trade ploy.
have traditionally hailed themselves as the party of free trade.
What other ways could Trump get Mexico to
During the campaign, Trump floated a number of possibilities
without committing to any in particular.
proposed changing a rule under the USA Patriot Act to block some of the roughly
$25 billion in remittances that Mexicans living in the US send home each year.
He said he would refuse to free up the money until Mexico agrees to pay the US
between $5 billion and $10 billion.
of that plan say Mexicans in the US would likely find other ways to send money
back. They could take cash with them when travelling,
wire money to a non-Mexican bank or use off-the-books transfers that are
difficult to police.
also suggested increasing visa fees for Mexicans to raise money, or cancelling business and tourist visas issued to
Mexicans until their country pays for the wall.