The Trump administration said it is considering imposing a 20% tariff on imports from Mexico as a way to pay for the wall it’s planning to build along the Mexican border.
In a meeting with reporters White House Press Secretary Sean Spicer had described the tariff as “comprehensive tax reform” that involved taxing imports from countries with which the US has a trade deficit—”like Mexico”—that would “easily pay for the wall.”
“It clearly provides the funding and does so in a way that the American taxpayer is wholly respected,” he said.
The American taxpayer, however, would likely bear the brunt of a border tariff. The tariff – or at least some portion of it – would simply pass the hikes onto American consumers, sending them the bill for the wall.
“The effect of a 45% tariff would be when you go to the store…the prices you pay go up 45%,” Sen. Ted Cruz (R-TX) said in the primary debate in Miami. “A tariff is a tax on you, the American people.” Polifact rated this as true.
In effect, this would be a $60 billion tax hike. Here are some charts that detail the economic relationship between the US and Mexico.
Many of the imports to the US from Mexico are consumer goods.
South Carolina Sen. Lindsey Graham expressed sadness over this proposal in a tweet.
Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad. (2)
— Lindsey Graham (@LindseyGrahamSC) January 26, 2017
A good chunk is food, as Graham notes.
As the AP reported in December, a George W. Bush 30% tariff on imported steel resulted in American producers raising prices, hurting steel-buying companies and costing thousands of jobs.
In the below graph of 2014 data from Census data on imports, the numerous industrial and “parts” categories suggest that a tariff would hurt jobs as well as hike prices.
The US has trade deficits with multiple countries. Mexico is in third place behind Germany and way behind China.
Mexico is one of the largest trade partners with the U.S.
The US is by far the largest trade partner with Mexico.