President Trump promises that Mexico will foot the bill for the gigantic border wall. On Thursday, Trump’s administration has suggested a 20pc tax increase on all products from down south. This measure could be part of the tax reform package but has to be worked out between Trump and Congress—from the White House. However, it raises more questions:
Who will foot the bill? Is it legal? What will be more expensive? —details that Trump is yet to work out.
What is it? A tax, a tariff or?
Additionally, Congress’s tax overhaul will see a 20pc import tax; countries that sell more to the U. S than buy from it—from the White house. The aim is to level the playing field for U. S companies by discouraging imports. The strategy overlaps with the “border adjustment” plan that House Republicans are gunning for. The plan would see the U. S tax imports but not exports from U. S companies.
The current projected revenues would top $1 Trillion in 10 years—initially, the revenue was to offset corporate income tax but it could finance the wall. However, Trump said he wasn’t for the ‘border adjustment” plan.
Products from Mexico would be more expensive, this includes tequila, eyeglasses, groceries and cars. According to Jim Lentz, Toyota North America CEO, the Toyota Camry would cost $1000 more—25pc of their car parts are shipped in.
American exporters rally behind the “border adjustment” plan due to the reduction in taxes while importers; consumer electronics and big retails would suffer in sales because of the inflated prices. In other words, U.S jobs would be lost and there would be inflated tax burdens for companies like Walmart.
Will Mexico be paying?
Not exactly. The U. S could offset part of the cost of the wall by altering the trade and tax policies with Mexico. However, the money isn’t necessarily coming from the Mexican government or their respective taxpayers.
It is also possible that the U.S. could recoup some of the wall’s costs by changing the tax and trade policies with Mexico. But the money wouldn’t necessarily be coming from Mexican taxpayers or the Mexican government. This would hurt companies exporting from Mexico but they are more likely to transfer the cost to consumers. Which leaves U. S citizens paying for most of it.
Note: Trump is keen on constructing the wall ASAP and is okay with getting a “reimbursement” later on.
Will the money be enough for the wall?
There is a chance. The cost of building the wall is estimated to be at $15 billion but House Republicans say that they could foot the bill as they expect to rake in more than $15 billion in the first year.
Any legal implications?
It’s a gray area. There is a chance Mexico could challenge new taxes at the World Trade Organization or under the North American Free Trade Agreement. On that note, Trump intends to renegotiate but Mexico has no obligation to make it easy for him.