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Op-Ed: Why the outrage over Trump's potential 20% border tax is ridiculous

Jake Novak

The idea that Donald Trump might impose a border tax on all goods coming from Mexico — and that it could be 20 percent — unleashed a lot of outrage from both sides of the aisle.

Then, White House press secretary Sean Spicer clarified that it was just a proposal.

That might seem like the White House pulling the reins after unexpected outrage but Trump's a smart businessman who knows a thing or two about making deals — and how to work the media.

It's altogether possible this was just the opening salvo and that the actual border tax could be a lot less than 20 percent — say, something more like 2 percent or 3 percent.

I mean, really, that doesn't sound bad at all after you were bracing for 20 percent, right?

Pass the guacamole!


In his 1987 bestseller, "The Art of the Deal," Trump documents his affinity for making almost insane opening statements or bids for projects and prices. In one instance, the future president boasts about getting almost 50 percent off the price of a private jet by first offering just a third of the original asking price. And the trend continues from there. Several Trump-watchers have opined over the past year that his campaign and now his presidency is incorporating that strategy, thus inducing initial shock and outrage and then relative relief.

So how would 2 percent work? Check out the actual trade numbers. The last full year with complete figures is 2015, when the U.S. imported $295 billion in goods from Mexico, according to the Office of the U.S. Trade Representative. A 2-percent tax would theoretically bring in $5.9 billion per year. Senate Majority Leader Mitch McConnell recently estimated that the wall would cost $12 billion to $15 billion . So, multiply $5.9 billion times four years and that brings in enough money to cover the cost of the wall in time for the 2018 midterm elections, with more than $8 billion to spare.

The question is: If you reduced the border tax to 2 percent from 20 percent, would the outrage die down enough to actually get this kind of tax plan through Congress?

If President Trump made that adjustment now, the answer would probably be no. The fact that it's U.S. consumers who would ultimately shoulder the cost of that tax — as companies paying that border tax raise prices on goods from Mexico — makes the idea a non-starter for many people across the political spectrum.

But never underestimate Trump and his deal-making ability: Watch for him to make the case that restricting illegal immigration will save the country and the taxpayers money over the long run and that could turn the tide of opposition.

Remember, President Trump is someone without any prevailing conservative or liberal ideology. His lack of liberal orthodoxy makes it possible for him to propose building a wall and his lack of a prevailing conservative ideology makes it possible for him to propose a tax to pay for it. And while that leaves partisans on both sides fuming, the much-less partisan American people can be convinced to get behind the idea. And that's true even before the Trump team starts making its inevitable case for all the construction jobs that will be created by the project on top of the growing argument that reducing illegal immigration will save taxpayers billions in annual costs for schooling, hospitalization, and policing.

And don't forget the persuasive power of President Trump if he were to drop that 20 percent to something more like 2 percent. That kind of a decrease would simply make the White House sound very reasonable and fair, wouldn't it? That's how Trump negotiating tactics work: They flip the script on the other guys across the table.

So it all boils down to two things: First, getting the hysteria to focus on the 20 percent number so intensely that a lower number like 2 percent sounds great by comparison. Second, taking the time to make a case for the cost savings included in restricting the flow of undocumented immigrants so taxpayers will be willing to pay extra for avocados and everything else from south of the border.

As negotiating and political tactics go, it's not too hard to see a scenario where this works out for the White House. For Mexico and the American consumer, perhaps not so much. But those who continue to underestimate President Trump and his team should know by now that these guys can really surprise you.


Commentary by Jake Novak, CNBC.com senior columnist. Follow him on Twitter @jakejakeny.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.



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