Will Trump Raise Tariffs on Mexican Imports to Pay for his Wall?

A confusing couple of hours on Thursday had people on Twitter asking a vital question: are avocado prices about to skyrocket? Of course, people also questioned whether the U.S. is on the brink of a trade war with Mexico, and how the wall on the Mexican border might ultimately be paid off by the American people. And this whole thing actually started on Wednesday, President Donald Trump signed an executive order to jump-start the building of the wall, which he reiterated will be, in one way or another, paid for by Mexico.

Mexican President Enrique Peña Nieto did not take kindly to Trump’s message. “I regret and condemn the United States’ decision to continue with the construction of a wall that, for years now, far from uniting us, divides us,” Peña Nieto said in a video message Wednesday evening. Trump responded, as he is wont to do, on Twitter:

The U.S. has a 60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers…

— Donald J. Trump (@realDonaldTrump) January 26, 2017

of jobs and companies lost. If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting.

— Donald J. Trump (@realDonaldTrump) January 26, 2017

On Thursday, Peña Nieto canceled his meeting with Trump. Later that day, at a GOP retreat in Philadelphia, Trump indicated that a change in the tax code could provide funding for the border wall. “We’re working on a tax reform bill that will reduce our trade deficits, increase American exports, and will generate revenue from Mexico that will pay for the wall if we decide to go that route.” he said.

A few hours later, at a news conference in Washington D.C., White House Press Secretary Sean Spicer said that Trump is embracing a House Republican plan that would raise import tariffs to 20 percent. He said the proceeds from that tariff would pay for the wall, which could cost as much as $20 billion to build. After a few hours of frenzied criticism, Spicer walked his statement back, saying the 20 percent import tax is just “one idea.” Trump’s Chief of Staff Reince Priebus said the administration was considering a “buffet of options.”

So while the U.S.-Mexico relationship may have been damaged on Wednesday and Thursday, it is unclear if there will be a 20 percent tax levied on Mexican goods. If there is however, it could be American consumers who ultimately foot the bill for the wall. Companies that sell Mexican imports in the U.S. could either increase prices to offset the increased tariffs, or they could absorb the tax and accept decreased profits.

Imported goods from Mexico can be found all over the U.S., from grocery produce bins to suburban driveways. In 2015, Mexico was the third-largest supplier of goods to the U.S., with $295 billion worth of goods funneling into the country. From vehicle imports ($74 billion) and electrical machinery ($63 billion), to vegetables ($4.8 billion) and fruits ($4.3 billion), Mexican-made or Mexican-grown products are consumed all over the U.S. And yes, that includes avocados: 78 percent of all avocados grown in Mexico are exported to the U.S.

Editor’s note: the article previously stated Mexico imported $60 billion worth of goods to the U.S. in 2015. The correct figure is $295 billion. 

Alec Siegel

Alec Siegel is a staff writer at Law Street Media. When he’s not working at Law Street he’s either cooking a mediocre tofu dish or enjoying a run in the woods. His passions include: gooey chocolate chips, black coffee, mountains, the Animal Kingdom in general, and John Lennon. Baklava is his achilles heel. Contact Alec at ASiegel@LawStreetMedia.com.