Now Americans, Not Mexico, Would Pay For The Wall?

Forbes (Opinion): 

By Stuart Anderson

January 26, 2017

Now Americans, Not Mexico, Would Pay For The Wall? 

In a startling new pronouncement today, Donald Trump’s press secretary proposed what many analysts have long suspected – Americans, not the government of Mexico, would pay for building a wall along the U.S. southern border.

US President Donald Trump said Thursday that talks with his Mexican counterpart Enrique Pena Nieto -- now called off -- would have been 'fruitless' if Mexico is unwilling to pay for a wall along the countries' common border. (NICHOLAS KAMM/AFP/Getty Images)

“Trump spokesman Sean Spicer added a stunning new detail about the proposed wall project later Thursday, saying that Trump intended to pay for it by imposing a 20-percent tax on all imports from Mexico,” reported the Washington Post. The comments came after Mexican President Enrique Peña Nieto canceled a trip to meet with Donald Trump over the controversy of the wall and who would pay for it.

Hours after Spicer’s remarks, Politico reported, “Later, however, Spicer quickly walked back his comments. The tax on imports, he said, was one possibility for raising revenue, not a specific policy proposal.” But it’s not clear how much of this represents “walking back.”

As economists know, a tax on imports is a tax against U.S. consumers, not against a foreign government. “Yes, a 20% tariff is a 20% tax on imports, and would be paid for by American consumers and producers, not Mexico,” according to Mark J. Perry, a professor of economics and finance at the University of Michigan-Flint and creator of the economics blog Carpe Diem. “Of course, the 20% tax/tariff would get passed along to American consumers in the form of higher prices for Mexican products. So it’s an economic reality that it will be Americans (consumers and producers) who will pay for the tariffs and will therefore pay for the wall, if that’s how the tariff revenue is allocated.”

That is not the only problem: Tariffs are set by Congress, which means members of Congress would have to sign off on this idea, including using it to pay for a wall.

A second, likely more serious issue, is imposing a 20-percent tax on imports from Mexico would violate U.S. commitments under both NAFTA (North American Free Trade Agreement) and the WTO (World Trade Organization).

“We bound our tariffs under NAFTA and WTO,” according to a former trade official in the Bush administration I spoke with. “I can’t imagine how the unilateral raising of tariffs like that would not lead to the filing of actions against the United States. If the other country prevailed against the U.S., as it likely would, it would lead to authorized retaliation against U.S. exporters.”

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