Trump Proposes 20-percent Tax on Mexican Goods to Pay for Wall; Other Countries Could Take a Hit

Consumer products and vehicles produced outside of the U.S. could see a big hike in sticker price if the Trump administration goes ahead with a proposed plan to tax Mexican goods — and eventually all foreign goods — to the tune of 20 percent.

The White House said today the measure is being looked at as part of a wide-ranging tax overhaul package under consideration by Congress. The announcement came after an anticipated visit by Mexican President Enrique Pena Nieto went south.

The meeting between Trump and Nieto, scheduled for next week, fell apart today, with the Mexican leader taking to Twitter to announce the update. Of course, Nieto’s tweet came after one fired off by Trump, where he said the meeting should probably not go ahead if Mexico isn’t willing to pay for the administration’s proposed border wall.

Earlier this week, Trump pulled the U.S. out of the fledgling Trans-Pacific Partnership and announced his intention to renegotiate the North American Free Trade Agreement. The president has clearly expressed his desire to reach bilateral deals with individual nations. Mexico sends 80 percent of its goods to the U.S.

“I’ve said many times that the American people will not pay for the wall,” Trump said after the visit’s cancellation. “Unless Mexico is going to treat the United States fairly, with respect, such a meeting would be fruitless and I want to go a different route.”

Yesterday, Trump signed an executive order to begin construction of the wall — a key election plank proposed as a method of stemming illegal immigration. Nieto tweeted that his country is still hoping to reach a trade agreements “that favor both nations.”

White House spokesman Sean Spicer said the import tax is one of a range of options for paying for the wall, and it could eventually be applied to other nations. He added the tax could be targeted at specific industries.

Even if the 20-percent import tax was only applied to Mexican-made goods, it would still cause a shakeup in automakers’ production plans. Car manufacturers, both domestic and foreign, move production of low-profit vehicles south of the border to avoid the expense of opening costly assembly American plants to serve the U.S. market. Earlier this week, Trump proposed decreasing corporate tax rates to between 15 and 20 percent.

While Mexico and other countries stare down the barrel of a serious economic disruption, Canada, on the other hand, could make out like a bandit — assuming that country’s free-trade agreement with the U.S. stays intact.

After Trump pledged to reopen NAFTA, the head of his business advisory panel said that Canada shouldn’t worry about collateral damage.

“Canada is very well-positioned for any discussions with the United States,” said Stephen Schwarzman, adding that the U.S. holds its northern neighbor in “very high regard.” Canada sends 75 percent of its goods to the U.S., including vehicles produced by the Detroit Three, Honda and Toyota.

[Source: Reuters, Business Insider]