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Trump is Considering 20% Border Tax to Pay for the Wall Project

Trump is considering 20% border tax in order to pay for the wall project. The plan was announced just hours after the Mexican president cancelled his visit to Washington. Bloomberg reports:

The idea of a border tax was first proposed by White House Press Secretary Sean Spicer to reporters on board Air Force One as Trump returned from a congressional Republican retreat in Philadelphia. Later in the day, Spicer amended his remarks in a meeting with reporters in his office.

“When you look at the plan that’s taking shape now, using comprehensive tax reform as a means to tax imports from countries that we have a trade deficit from, like Mexico, if you tax that $50 billion at 20 percent of imports,” Spicer said on the president’s plane. “By doing that we can do $10 billion a year and easily pay for the wall just through that mechanism alone.”

Spicer didn’t explain how such a tax would work or how it would affect U.S. consumers and companies. Asked if the tax could be applied to other countries, Spicer said the administration is “focused on Mexico right now.” (Read the full article)

I would expect more weighted and professional approach from the Trump’s team. The border tax, as any import tax, is eventually paid by the US consumers, not by the Mexican exporting companies. The cost of moving goods across the border will be absorbed either by the US importers (like Walmart or Target) in the form of lowering the profit, or by the consumers in the form of higher prices. The increased prices on Mexican goods will likely reduce the consumption. As a result, imports from Mexico will dwindle, hurting Mexican manufacturers. So economically the border tax is not beneficial to any party and the US taxpayers will be paying for the wall.

 

See also:

Trump Border Tax and the Dollar Appreciation

Trump’s Withdrawal from TPP

 

Sources:

Trump Floats 20 Percent Border Tax as Mexico Feud Deepens

Trump mulls 20% border tax on Mexico; aides later call it just an option

Trump floats 20% tax on Mexican imports to pay for wall, but considering other options