Who will really pay for “The Wall” if the President Trump with the consent of Congress decides to raise a 20% tax on imports from Mexico? We do! Let’s go through the logic:
- We import goods from Mexico to be consumed by us here in the US. And, if a tariff is raised, the price of goods imported and consumed will increase by 20%. So, we, US consumers, will be paying for the Wall;
- It is likely (very likely) that Mexico will raise tariffs on goods imported from the US into Mexico—they are our second largest trading partner. That will also affect US citizens as the reduced demand for our goods (formerly exported to Mexico) will mean fewer jobs (because of lower demand) and those will be US jobs.
A tariff to pay for the Wall just doesn’t make sense!
This isn’t to say that we don’t have issues (both trade and immigration) that need to be addressed. But, it seems to me that bullying our neighbors (and more generally trading partners) is not a good approach to dealing with these issues. And, President Trump isn’t doing himself or our Country any favors (or is he likely to meet his objectives) by raising tariffs and more generally by his approach (bullying rather than negotiating—and there is a difference, bullying may be “effective” on a transactional level, but rarely is it productive when the parties are engaged in an on-going relationship*) to dealing with these important issues.
I would note that while I think that there are some very specific issues (e.g. China’s trade policy and the flow of immigrants, through Mexico, from Central America) that need to be addressed. I will address this topic more thoroughly in a future post.
*See Getting to YES, Fisher and Ury- Penguin Books
Copyright 2017 Howard Niden