Yes, Trump’s 20 Percent Mexican Tariff To Pay For The Wall Is A Bad Idea

And he was doing so well

White House Press Secretary Sean Spicer said Thursday afternoon that President Donald Trump was not formally proposing a 20 percent tax on Mexican imports to pay for his controversial border wall, but rather considering it among a menu of options.

“The goal today is not to be prescriptive. It’s to basically say: hey, here is a way in which the wall can be paid for extremely easy and not say ‘this is what we’re doing,'” Spicer told reporters. “This is not what we’re rolling out.”

Spicer’s clarification came after an earlier statement signaling Trump favored the policy and had discussed the plan with congressional Republican leaders as part of a broader tax reform effort. Chief of Staff Reince Priebus said the 20 percent tax on Mexican imports is one of a “buffet of options.”

“When you look at the plan that’s taking shape now, using comprehensive tax reform as a means to tax imports from countries that we have a trade deficit from, like Mexico, if you tax that $50 billion at 20 percent of imports … By doing that we can do $10 billion a year and easily pay for the wall just through that mechanism alone. That’s really going to provide the funding,” Spicer said, calling it “ridiculous” to tax exports but let imports flow freely in.

Trump later was asked by NBC News about the 20 percent import tax and replied, “We’re going to tax people coming in. Look, we cannot lose our companies to Mexico or any other place and then have them make the product and just send it across our border free. We’re going to put a substantial tax on those countries.”

Today was Mexico Day for the Trump administration, as that country’s president Enrique Peña Nieto canceled a planned visit to the White House on Tuesday and there was a great deal of debate and histrionics over the future of the North American Free Trade Agreement, which Trump has been hypercritical of as a ripoff of American workers.

The suspicion here is that the 20 percent tariff is merely a gambit offered to soften up the Mexicans for negotiation purposes. It’s highly unlikely Trump could pass that tariff through the House, and there is virtually no chance he can get it through the Senate. But given that Mexico is the USA’s third-largest trading partner and we are their largest, the idea of Mexican goods costing 20 percent more in American markets while products from places like Thailand, Vietnam, Brazil and India come sailing in without such taxes attached would have to be a scary one to them.

And we’re guessing Trump will send his Secretary of State-to-be Rex Tillerson to Mexico City to play good cop to his bad cop and derive some sort of concessions out of giving the tariff up. Perhaps the Mexicans will drop their objections to another idea for how to make them pay for the wall; namely, a tax on the $24 billion in remittances from Mexicans and Mexican-Americans living in the United States back home south of the border. Those remittances play a fairly key role in the large amount of illegal immigration from Mexico in this country and why the Mexican government had printed literature instructing its people how to successfully cross the border.

One can’t blame the Mexicans, after all – expatriating its poor to America and turning those people into a profitable driver and capital source for the Mexican economy without having to spend anything to feed, clothe, house, medicate, educate or incarcerate them is a pretty darned good way to let off some steam that might otherwise make for political trouble.

But while overall it’s probably true that illegals from Mexico contribute more to the American economy than they take out, it’s true only in an uneven sense; the lawn guy in Rhode Island who’s fully assimilated into a working- or middle-class American lifestyle even though he’s illegal represents a little different effect than the Texas jailbird who costs $20,000 per year to occupy prison space and treat for substance abuse. Thus in Rhode Island objections to illegal immigrants sound racist, while in Texas they’re shared by Hispanic citizens. For someone like Trump, the latter seems the more accurate perspective, plus he wonders which American workers could be mowing those lawns in Rhode Island instead of scraping by on Social Security disability, Section 8 housing and food stamps if the illegal wasn’t there. And from that view there isn’t any kind of clear showing that illegal immigration is this great benefit.

Therefore, to raise the $20 billion (or whatever the number is) to build the wall that assumedly will put a major crimp in illegal immigration Trump is hoping he’ll get the Mexicans to agree to something better. Exactly what that is we can’t say. Maybe it’s a renegotiation of NAFTA on more favorable terms which pumps enough into the American economy to pay for the wall.

What we can say, though, is based on the rest of what Trump has done so far, nearly all of which has exceeded expectations, that tariff idea can’t possibly be Trump’s ultimate solution to the problem. If he goes forward with it as anything more than a negotiating tactic it’ll backfire in Congress – and it should.

UPDATE: Here’s a thought – is Treasury shorting the peso?

The Mexican peso dropped across the board in the currency market amid rising tension between the US and Mexico. Mexico’s president, Enrique Peña Nieto, canceled a planned meeting with US President Donald Trump over, in the US, after Trump insistence that Mexico will pay for the border wall.

“This morning we have informed the White House that I will not go to the meeting scheduled for next Tuesday with @POTUS,” Peña Nieto tweeted, announcing the decision.

USD/MXN jump to 21.35, hitting a fresh daily high. The rally changed the tone of the pair that earlier was trading below 21.00 for the first time in three weeks. It bottomed at 20.86, the lowest since January 3.

At the moment, is trading at 21.28, still down for the week but the recent reversal could signal the end of the bullish correction of the Mexican peso, that is taking place since last week, when it started to recover after hitting record lows (USD/MXN at 22.03).

Earlier today the Mexican peso was among the top performers in the currency market.

Shorting the peso and pocketing the profits would be a ruthless way to get the Mexicans to pay for the wall, and it would also be tantamount to making American exporters to Mexico pay for the wall. But doing so quietly would send a signal to Mexico’s government that they’d better cut the best deal they can or else Uncle Sam will take more than their lunch money.

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