President Trump proposed on Thursday that he plans on using Mexican
money to build his wall. Trump suggested
that a 20 percent tax on imports from Mexico, totaling around 300 billion
dollars will fund it. The article explains
some trouble with tariffs, starting with the fact that a 20 percent tax on imports
from Mexico would violate the North American Free Trade Agreement and also the
rules of the World Trade Organization. Trump
also talked about taking the United States out of the global trade accord,
which would likely impose enormous costs on the American and world economies
and could even start a global trade war.
The article
goes on to talk about blocking money transfers. It states that Mexico receives about
$25 billion a year from Mexicans living abroad, primarily in the United
States. Trump threatened that he will
change the rules of the Patriot Act antiterrorism law to forbid immigrants who
cannot prove that they are a legal resident from tiring money abroad. Trump hopes that the loss of resources will
force the Mexican government to offer to pay for the wall.
The article also dives into
possible ways of getting access to other money.
It suggests charging Mexicans more for visas and boarder cards, but it
would take a ton of charges to be able to cover the cost of the wall. Mexican companies have close to $20 billion dollars
and nearly 12 million Mexicans investing and living in the United States so
Trump could most likely find money somewhere, but he must be careful of the
income tax treaty the United States has with Mexico. The United States agreed to tax Mexican
residents who are subject to income tax at a reduced rate. Trump needs to make sure that he does not
break the law.
The article
concludes by talking about the overall ultimate price, stating that Trump has acknowledged
that how Mexico pays might be very complicated, which could bean that he plans
on getting a majority of the money elsewhere.
Trump must be careful on how he finds funding for his wall.
https://www.nytimes.com/2017/01/26/business/economy/mexico-pay-border-wall-trump.html?ref=business
6 comments:
The construction of the wall will have both large psychical and economic implications on the United States and Mexico. It seems that it will have more harm to the United States than help. Causing the rise of prices from anything imported from Mexico. Placing the burden more on the American consumer than Mexico itself. It will be interesting to watch what happens in the months and years to come.
It is also interesting to take a look at how this poorly thought out tariff is being justified by the administration. They are touting the small benefits of isolationist policies in defense and suggesting that the tariffs will deter consumers from buying Mexican products (since they will be more expensive to buy now) and lead to a lesser dependence on Mexican products. They believe it will increase demand for US made substitutes and allow domestic markets to flourish.
However the problem with this argument is that if US products were made efficiently enough in the first place then demand would not need to be created artificially. We know that there are gains from trade and protectionist policies ultimately end up hurting consumers in most cases.
It simply does not make sense to implement this policy given that it is violating international trade agreements, leading to a loss in total surplus and ultimately not paying for the ever elusive wall.
In the past week, it has been fascinating to see the reality of the Trump administration take form. They ran on these huge radical promises of the wall, repeal of healthcare, etc, and no explanation or substantial policies were paired with the promises. The public has a front row seat to the implementation of Trump's promises. I think Trump has surprised many by following through on what they thought were simply soundbites to get elected. This is all new territory for the public to learn what to do with. Trump is not a normal president and his first week has shown that his term will not fit into the status quo of previous administrations.
I agree with the statements above. I think that the tariff that is going to be implemented will do more harm to the United States citizens checkbooks then then good, the reason that i say this is if you do the 20% tariff on goods that are entering the U.S from Mexico what is stopping Mexico from raising all there prices above 20% so that they don't get harmed from the tariff as much. this will also make goods in the states more expensive because some of the raw materials that are used are imported from Mexico. it will be interesting to see how this all palys out.
I believe if this happens, we will see a decrease in the number of imports comings in from Mexico. This is not good, especially from U.S Business's with plants in Mexico. Starting a trade war would not be the solution as we would crush their economy, which is much smaller than ours.
I agree with Munir, this will surely become some other nations gain if we continue to ruin relations with Mexico, while many businesses rely on saving money by moving operations to Mexico. In the short term you'll create more jobs in the US if the operations come back, but long term those businesses will close down because they'll have to pay high wages to Americans and that'll result in more job loss. It'll be interesting to see what happens in the coming months.
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