Friday, January 27, 2017

President Trump Proposes that American Consumers Pay for "The Wall"

This week President Trump floated the idea of a 20% tax on Mexican imports to pay for the ridiculous wall he intends to have built along the Mexican-US border.  As several economists and legislators immediately pointed out, that would mean Americans and not Mexicans are paying for the wall.   From a CNN Money story on the subject:
"The notion that a 20% tariff is a way of forcing Mexico to pay for the wall, it's just a falsehood. It's a way of forcing American consumers to pay for the wall," says Edward
Alden a trade expert at the Council on Foreign Relations
.
Here's why.

First, about 6 million U.S. jobs depend on trade with Mexico, according to the U.S.
Chamber of Commerce. Experts say those jobs would be jeopardized if Trump restricts trade with Mexico.

Americans will very likely face higher prices for many things -- from cars and computers to avocados and Corona. A litany of products imported from Mexico would be more expensive.  
... 
There are other less obvious ways a blunt tariff could come back to bite Americans. Higher prices on some products mean that Americans would have less money to spend on others.

That would end up costing jobs. That's what happened in 2009 after President Obama used tariffs on Chinese tires. It cost more jobs than it saved because prices for tires went up, one study found.

And a Trump tariff would apply to many more products, so the ripple effects would be a lot broader.

That brings us to who pays for the wall. When the U.S. government applies a tariff on Mexican goods shipped into the U.S., Mexican companies don't pay the tariff -- American companies pay it. Companies usually pass the increased cost of goods down to consumers, hence the higher price tag.

So yes, a 20% tariff would pay for the wall. But Mexico would not be paying for it. American consumers would ultimately pay the price. Literally. 
It's Economics 101, a course Trump apparently never took in college.

6 comments:

Eric Morris said...

Off the Trump aspect, I would support tariffs since they coincide with the physical borders to replace the income tax. It makes logical sense to match the physical with the fiscal.

Anonymous said...

Amen! This is a total snow job... welcome to Trumpland!!

Nicolas Martin said...

Trump is talking about abolishing the income tax?

Anonymous said...

Trump has brought the country together, we all hate him.

Pete Boggs said...

Christina Scales has betrayed her base. Switching parties is fair play if the change is made for & during an election. A friend pointed this out during Jose Evans switch & he was right.

indyjonesouthere said...

Actually he could start the tax a little lower and raise it 5% each of the 4years of his presidency. That would give a domestic producer the incentive to build a competing product to replace the imported product. That would raise import costs at a slower rate and giving the buyer a break and encourage competitors to add/create jobs while replacing the foreign producers products. That's called winning.