So were going to tax Americans until Mexico stops allowing people from Central America to exercise their legal right to seek admission to the United States?
Seems pretty foolproof.
President Trump announced Thursday evening on Twitter, his preferred medium for policymaking, that he plans to impose a new tariff on all imports from Mexico, until the illegal immigration problem is remedied.
The tariff would begin at 5 percent on June 10 and gradually rise to 25 percent by October.
Mr. Trump persists in the falsehood that tariffs are paid by Americas trading partners. The truth is that Mexico would no more pay this tariff than it is paying for the construction of a border wall. The evidence is clear: Mr. Trumps tariffs are taxes being paid by Americans.
This new tax would sit atop Mr. Trumps tariffs on aluminum and steel imports, and Mr. Trumps tariffs on Chinese imports, and the bill is adding up. The United States so far has collected about $19 billion in Trump tariffs. A full 25 percent tariff on Mexican goods could add as much as $87 billion a year to that total.
Mexico would most likely respond by imposing retaliatory tariffs, which is especially bad news for the probable targets: American farmers. About two weeks ago Mr. Trump ended a tariff on Mexican aluminum and steel, and Mexico ended a tariff on American farm goods. So much for that false dawn. Farmers may need to resume the search for new markets.
Taxation is always painful, and always the question is whether the benefits outweigh the pain. In this case, Mr. Trump is using a tariff as a cudgel to induce Mexicos cooperation in keeping immigrants from Americas southern border. While the cost of the tariff would be paid by Americans, the Mexican economy most likely also would suffer a loss of sales to the United States.
Mr. Trump might succeed in pressuring Mexico to take stronger steps on immigration. Tariffs, however, are a very crude tool. Most of the immigrants seeking to cross the southern border are fleeing problems in Central America that are beyond the control of the Mexican government. Moreover, while Mr. Trump tends to refer to all of the immigrants as illegal, many are exercising a legal right to seek asylum.
Past administrations have sought cooperation from Mexico on immigration issues without disrupting economic relations between the two countries. Mr. Trumps decision to mix the two issues threatens to disrupt both economies because the manufacturing sectors in Mexico and the United States are tightly intertwined. About two-thirds of trade between the countries is between factories owned by the same company, according to Deutsche Bank.
THE AUTO INDUSTRY is the largest and most important example. Many vehicles are produced by a combination of Mexican, Canadian and American factories. The Ford F-150 pickup truck the best-selling vehicle in the United States is assembled at factories in Kansas City, Mo., and Dearborn, Mich., but 15 percent of the parts come from Mexico.
The industry has long argued that its reliance on Mexican factories for labor-intensive production of some parts allows companies to keep assembly plants in the United States. Tariffs threaten to disrupt that symbiosis, which could push production overseas.
Similarly, vehicles assembled in Mexico are full of American parts. By one recent estimate, American parts make up 38 percent of the value of the average vehicle imported to the United States from Mexico. Mr. Trumps tariff is a threat to that line of business, too.
Mr. Trumps tariff also could derail his efforts to secure approval of a renegotiated North American Free Trade Agreement the deal that sets the terms of trade among the United States, Mexico and Canada. The main point of the deal, from Mexicos perspective, is to guarantee reliable access to the American market. In exchange, Mexico has agreed to make concessions, including improvements in labor laws. But Mr. Trump is giving Mexico reason to doubt whether he would keep his side of the bargain.
