From the initial announcement of his candidacy, President Trump has promised to build a wall between the United States and Mexico. As a matter of fact, he spoke of Mexican immigration when he announced his candidacy on June 16, 2015.
He’s also promised to compel Mexico to pay for it. But he never clearly told us how. I think we can all agree that if he sends a bill to Mexican President Enrique Pena Nieto it won’t get paid. A few times he’s threatened to tax or ban remittances (money sent from the United States to Mexico, often from relatives).
Last week he announced a different plan: a 20% tariff on products imported from Mexico. Perfect, right?
Well, not exactly. You see, a tariff means that if Mexico imports a $20,000 car, the United States collects $4,000. A tariff is imposed to make an import more expensive and make a similarly produced American product more appealing. So Mexico appears to be the loser here.
Except that a tariff assumes Mexico will then charge $24,000 for the car. If the Mexican manufacturer eats the extra charge the tariff doesn’t work, so we can assume they will pass along the $4,000. Some Americans will pay the $24,000 and others will purchase a car made here. But there are some things that can only be made in Mexico.
We Americans love our margaritas, and depend on tequila from Mexico. By law, tequila must come from a region in central Mexico (the states of Jalisco, Colima, Nayarit and Aguascalientes). Tequila is distilled from the blue agave plant, and by all accounts, it can’t be grown anywhere else. You can read about it here. You can also read a funny response from South Carolina Republican Senator Lindsey Graham.
But whether we pay the tariff out of choice or not, it doesn’t matter. At the end of the day the US government comes out ahead (they collect the tariff), Mexico breaks even (they pass the cost of the tariff to us), and we come out behind (paying more for the products we purchase).
In other words, we pay for the wall.
President Trump, when you promised us Mexico would pay for a wall many of us don’t want, you were lying. You hoped we wouldn’t notice, but we did.