It’s a freaking tariff.
Earlier today, Mexican President Enrique Peña Nieto canceled a visit to America after President Donald Trump told him to do so if Mexico refuses to pay for the border wall. Despite the cancellation, Trump and his administration has not backed down on making Mexico pay for the wall. Today, Press Secretary Sean Spicer released details how Trump plans to make it happen:
In remarks to reporters, press secretary Sean Spicer said a plan was “taking shape now” to institute a 20% tax on imports from countries with which the U.S. runs a trade deficit, “like Mexico.”
Mr. Spicer later told reporters that this was one of several ideas being considered by the White House to “demonstrate that paying for the wall can be done.” Mr. Trump’s chief of staff, Reince Priebus, said the administration was considering “a buffet of options.”
As The Wall Street Journal pointed out, the plan “is the same ‘border adjustment’ idea of taxing imports and exempting exports that House Republicans have been pushing as part of their tax agenda for 2017.” Others countries that also “have value-added taxes, which are a tax on consumption,” use border adjustments focused “on domestic consumption by taxing imports and making exports tax-free.”
It’s a freaking tariff.
The report continued:
Border adjustment operates like a tax on the trade deficit. The U.S. runs an annual trade deficit with Mexico of about $50 billion. At the proposed new corporate tax rate of 20%, that would generate about $10 billion a year.
Viewed this way, Mexico’s government—which has vowed not to pay for the wall—wouldn’t be paying the costs directly, and the statements from the U.S. administration Thursday are an admission of how unlikely that is. In fact, the costs would be collected by companies selling Mexican-made products in the U.S.
There are still many details to work out as lawmakers write a major tax bill over the next few months. Republican senators have been cautious about backing the House tax plan and Democrats view it as part of an unacceptable package that benefits high-income households too much.
Trump alluded to this in Philadelphia in front of Republicans:
“We’re working on a tax reform bill that will reduce our trade deficits, increase American exports and will generate revenue from Mexico that will pay for the wall if we decide to go that route,” Mr. Trump said.
Without saying “border adjustment,” a term Mr. Trump has criticized, the administration appeared to be moving toward the border adjustment concept, which is a crucial part of the tax plan being pushed by House Speaker Paul Ryan (R., Wis.) and Ways and Means Chairman Kevin Brady (R., Texas).
“Right now our country’s policy is to tax exports and let imports flow freely in, which is ridiculous,” Mr. Spicer said Thursday. “We can do $10 billion a year and easily pay for the wall just through that mechanism alone. That’s really going to provide the funding.”
Sounds an awful like a tariff to me, which hurts the consumer in the end. So not only would the taxpayer end up paying for this wall, but the end result will hurt our pocketbooks. It will hurt us twice:
Such a tax could drive up costs of imported goods, including produce, toys and consumer electronics. However economists say imposing the tax would also drive up the value of the U.S. dollar, which could soften the blow to importers by lowering the pretax cost of the goods and services they bring into the U.S.
The large retailers and oil refiners who have been opposing the House plan doubt that the currency adjustment would happen nearly as neatly as economists predict, and they think the tax plan would force them to raise prices. A sharp shift in the dollar could also unsettle markets, hurt investors with holdings overseas, and change the Federal Reserve’s calculations about interest-rate decisions.
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