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A 20 percent tax on imports to the United States is among the options President Donald Trump is considering to make Mexico pay for a border wall between the two nations.
White House press secretary Sean Spicer revealed the proposal in a conversation with reporters on Thursday. He subsequently clarified to NBC News that it was meant merely as one of many potential payment options.
If enacted, such a tariff would likely raise prices for American consumers, as well as violate the North American Free Trade Agreement, inviting retaliatory tariffs from Mexico on American goods. The announcement ― made just hours after Mexican President Enrique Peña Nieto canceled a trade meeting with Trump in response to Trump’s insistence that Mexico would pay for the border wall ― will likely escalate the already-tense relationship between the Trump administration and the Mexican government.
“This is something that we’ve been in close contact with both houses [of Congress] in moving forward and creating a plan,” Spicer told reporters according to the White House press pool report. “It clearly provides the funding and does so in a way that the American taxpayer is wholly respected.”
The top U.S. imports from Mexico in 2015 were vehicles ($74 billion) and electrical machinery ($63 billion). The country is also the second-largest source of agricultural goods imported to the United States.
Assuming the tax would apply to all Mexican exports, Americans could end up paying higher prices on everything from American-made cars, which often rely on Mexican parts, to fresh vegetables and fruits.
“The U.S. automobile supply chain is heavily integrated with Mexico and Canada. If you start monkeying around with tariffs along that supply chain, you’re pushing costs up,” said Josh Bivens, research and policy director at the Economic Policy Institute, a progressive think tank often skeptical of free-trade agreements.
In his comments to reporters, Spicer implied that such a tax is common among countries with free trade relations.
“We are probably the only major country that doesn’t treat imports this way,” he said.
In truth, Mexico has a 16 percent value-added tax on all goods, domestic and foreign. The Mexican government reimburses companies in its country for the tax if they export the product, but Mexican companies pay the full tax if they sell the goods domestically. In that way, Mexico still complies with NAFTA by ensuring U.S. goods an “even playing field” in the Mexican market, according to Bivens.
By contrast, Bivens argued, levying a 20 percent tax on Mexican exports into the U.S. market would violate NAFTA by limiting Mexican access to the American market. Mexico would, in turn, be legally entitled to retaliate with a tariff of its own on American goods.
“If you’re trying to make Mexico pay for the wall, this is not how you do it. This is U.S. consumers paying for it,” Bivens concluded. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.
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