US President Donald Trump is determined that the Mexico will pay for his massive border wall. While there is a significant deal of ambiguity about the project. Donald Trump’s administration has proposed a 20 % tax on products imported from Mexico and they believed to be part of a comprehensive tax reform package. But the question remains : That who will pay for the wall – Americans or Mexicans ?
Here is how the Donald Trump and his team may work out the controversial proposal:
This is a tax, a tariff or something else?
- This is unclear. Congress proposed tax overhaul will place a 20 % tax on imports from any country selling more goods and service to the US than buying from it. The idea is to balance the playing field for the US companies by discouraging Americans from importing.
- The idea appears to be overlapped with a plan House Republicans are pushing called border adjustment. Under this plan, the US will refrain from taxing American companies exports, but would tax imports.
- However, Donald Trump recently said he didn’t like the border adjustment idea.
What does this plan mean for Americans?
- Mexican products would become more costly. Which means pricier tequila, but also things Americans will need: cars, eyeglasses and many basic groceries.
- US exports are behind the House plans because it would reduce their taxes.
- But the flip side is that importers, including the big retailers and consumer electronics firms, say the higher prices for the Mexican products could hurt sales and negatively impact on the American jobs.
Will The Mexico really be paying for the products or services?
- Not really. The US could recoup some of the wall’s costs by changing the tax and trade policies with the Mexico. But the money wouldn’t necessarily be coming from the Mexican taxpayers nor from the Mexican government.
- While the tax would land first on the companies exporting from Mexico, the costs would likely be passed on to the consumers.
Will this plan raise enough money to pay for the wall?
- Probably. Different estimates put the wall’s cost at up to $15 billion.
- House Republicans expected that their plan to pull in much more than that in its first year. The revenues generated from this plan are projected to exceed $1 trillion over a decade.
Is it legal to pay extra taxes?
- To be determined. The US has a wide range of the obligations under the North American Free Trade Agreement (NAFTA) and at the World Trade Organization.
- Donald Trump has said he plans to renegotiate NAFTA. But Mexico is unlikely to make it easy for him if threatened with any new tax which penalizes its economy.
- Other countries may also object, if their products and the services are targeted.
How would this plan affect the economy?
- Mexico is the second-largest exporter to the US, after the China. Any instability in the US-Mexican trade relationship could have implications for the entire world.
- The White House said the plan would increase the US wages, help US businesses and consumers, as well as deliver huge economic benefits.
What other ways could Donald Trump get Mexico to pay?
- During the campaign, Donald Trump floated a huge number of possibilities without committing to any in particular.
- He proposed for changing a rule under the USA Patriot Act to block some of the roughly $25 billion in remittances that the Mexicans living in the US send home each year. He said that he would refuse to free up the money until the Mexico agrees to pay the US between $5 billion and $10 billion.
- Donald Trump also suggested that increasing visa fees for the Mexicans to raise money, or cancelling business and tourist visas issued to the Mexicans until their country pays for the wall.