President Trump has signed an executive order that authorizes the construction of the wall that he promised would be built along the United States-Mexico border. To pay the massive bill that such an ambitious construction project would bring, Trump also proposed a 20 percent tariff on goods imported from countries that the U.S. has a trade deficit with, including the $50 billion deficit with Mexico. Trump says that this is his way of getting Mexico to pay for the wall, but in the end, it will be the American consumer that will be footing the bill.
A twenty percent tax on $50 billion worth of imports would net the government $10 billion, an amount that would easily pay for the wall’s construction, according to White House press Secretary Sean Spicer. The tax is actually part of a tax reform plan proposed by House Republicans. The tax is basically what is called a destination-based cash flow tax, would be a national-level sales tax imposed on retailers and other importers. This increase in cost would, as usual, be handed down to the consumer, in the form of increased prices.
Mexican exporters would likely see a drop in income, either from lowering prices to remain competitive with domestic U.S. sources, or as American consumers buy less of their imported goods. But either way, this means that U.S. shoppers will have to pay more for these goods, especially on food, as Mexico is the nation’s second-largest supplier of agricultural goods. Many Americans currently living from paycheck-to-paycheck rely on low-cost imported foods to feed their families, and for many, buying less is not a healthy option.
And the deal doesn’t end there: this new tax applies to any foreign country that the U.S. has a trade deficit with, including Canada, China, Mexico, Germany and Japan — meaning goods such as food, petroleum, automobiles, electronics and other goods coming from not only these countries, but also any other nation that applies, will see a substantial increase in price.