Trump wants 20 per cent import tax to pay for Mexico wall

EVERYONE has been wondering how Donald Trump will pay for his wall along the Mexican border. Now his master plan is finally taking shape.

EVERYONE has been wondering how Donald Trump will pay for his wall along America’s border with Mexico. Now we finally have an idea.

Today the president’s press secretary, Sean Spicer, indicated Mr Trump would support funding the wall with a 20 per cent tax on imports from Mexico. He said the plan now taking shape would tax imports from countries “that we have a trade deficit from, like Mexico”.

“If you tax that $50 billion at 20 per cent of imports – which is by the way a practice that 160 other countries do – right now our country’s policy is to tax exports and let imports flow freely in, which is ridiculous,” Mr Spicer told reporters aboard Air Force One.

Mr Spicer said the new tax would generate $10 billion a year and “easily pay for the wall”.

Later, Mr Spicer walked back his comments somewhat, saying the tax idea was merely an “example” of how the wall could be funded. But the proposal seems to have fairly broad support.

President Donald Trump walks to board Air Force One for the first time. Pic: AP

“This is something that we’ve been in close contact with both houses in moving forward and creating a plan,” Mr Spicer said of the tax plan, suggesting that congressional Republicans back the proposal.

“It clearly provides the funding and does so in a way that the American taxpayer is wholly respected.”

Any plan to tax Mexican imports could carry significant risk for the United States. Mexico is its third-largest trading partner, with imports totalling about $300 billion a year. That includes roughly $70 billion worth of vehicles, $60 billion in electrical machinery, $50 billion in other machinery and $10 billion in optical and medical instruments. Mexico is also the second-largest supplier of agricultural products to the US.

During the presidential campaign, Moody’s Analytics prepared an economic model in an effort to predict what would happen if Mr Trump followed through on his promise to levy tariffs on other countries, such as Mexico and China. According to the firm, if those nations retaliated with their own taxes on American goods, everyone involved could fall into recession, leading to millions of job losses.

A 20 per cent import tax, limited to Mexico, would likely have a smaller impact, but could still harm economic growth in the US as businesses that manufacture goods in Mexico pass the tax on to American consumers.

However, it’s not necessarily all doom and gloom. There are suggestions Mr Trump could incorporate the import tax into a broader Republican proposal, which is called “border adjustment”.

As Mr Spicer pointed out, the US currently imposes a tax on exports to Mexico, exempting imports. A border adjustment would essentially swap that around, taxing imports instead of exports. If that sounds confusing, you can read more about it in more detail here.

Donald Trump at the White House. Pic: AFP

Mr Trump’s promise to build a wall and “make Mexico pay for it” was one of the earliest and most important pledges of his campaign.

This news comes on the same day the president of Mexico, Enrique Pena Nieto, cancelled a trip to the United States that had been set for next week. Mr Trump had jumped on Twitter overnight to say his counterpart should scrap the visit if he wasn’t willing to pay up.

“The US has a $60 billion trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers 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,” Mr Trump tweeted.

Mr Nieto responded in kind. “This morning we have informed the White House that I will not attend the meeting scheduled for next Tuesday with the POTUS,” he said.

At a press conference shortly afterwards, Mr Trump said that it would have been “fruitless” for Mr Nieto to come for talks if Mexico was unwilling to pay for the wall.

“The president of Mexico and myself have agreed to cancel our planned meeting scheduled for next week,” Mr Trump told Republican politicians at a retreat in Philadelphia.

“Unless Mexico is going to treat the United States fairly with respect, such a meeting would be fruitless, and I want to go a different route. I have no choice.”

Enrique Pena Nieto, Mexico’s president. Pic: AP