Lost amid the hoopla of whether Donald Trump and Mexican President Enrique Pena discussed whether Mexico would pay for the wall that Trump wants to build is the simple fact that the GOP presidential candidate's proposal isn’t a real plan. Trump’s plan is based on a failed understanding of how the banking system works and could never work, as he’s proposed it. Worse yet, if he tried as president to implement the plan, it would have major ramifications beyond just Mexico.
Trump’s initial proposal as to how Mexico will be forced to ‘pay for the wall’ was unwise, unworkable, and displayed an astonishing lack of understanding of how global finance actually works, as I have written in detail before. His proposal, which relies on vague legal authority to force banks to cut off their customers’ access to move their own money around the world, assumes that American banks have the ability to cut off payments from any non-citizen or lawful visitor: they don’t. His plan, if implemented, would essentially shut off the ability for most Americans to send funds to anyone in the world because Trump’s proposal requires them to prove citizenship or legal status to their bank.
Banks today are not required to ask whether you are a citizen, legal resident, or lack proper legal status. Anyone can open an account with proper identification for taxes and proof of identity. Paypal can require a thumbprint ID to send money on a phone, but there is no requirement that banks see your birth certificate or passport. The majority of Americans do not own a valid U.S. passport and would struggle to proactively prove they have a right to send money overseas under Trump’s plan. And most people who send money overseas are U.S. citizens or are legally working, staying, or visiting the U.S.
Trump’s plan to pay for the wall is not targeted at Mexico. It affects the entire world. His proposed rule would require that “no alien may wire money outside of the United States unless the alien first provides a document establishing his lawful presence in the United States.”
That means that anyone in the U.S. wishing to send money anywhere in the world would have to establish lawful presence in the U.S. Thus, rather than just being targeted at Mexico, Trump’s plan would affect China, India, the Philippines, and Nigeria – countries with citizens who, combined, receive almost twice as much money from family members living in America than do all citizens of Mexico combined.
In fact, according to research by the Pew Center, more than 80% of all remittances made by people working in America go to countries other than Mexico. Has Trump considered the global ramifications of his proposal?
For the over 45 million Americans who were born abroad, as well as anyone with family or friends, businesses transactions, or even travels abroad, your ability to send your own money easily and conveniently when you want it is at risk under the Trump plan. The focus of the debate should not be about whether the issue of Mexico paying for the wall was raised at the Trump-Peña Nieto meeting or not, but rather that the plan itself is built on false and reckless assumptions about how the real world works.
In sum, Trump’s visit to Mexico was a test beyond whether a presidential candidate who has made racist remarks about immigrants from a country can return to that country and have a productive conversation at the presidential level. It was a test as to whether Trump understands the real world of global finance, trade, and the economic importance of the U.S.-Mexican relationship. Up until this point, Trump has failed that test in ways that could prove dangerous if he is elected.
Aaron Klein is a fellow in Economic Studies at the Brookings Institution. He also serves as an unpaid member of the Clinton campaign’s Infrastructure Finance Working Group; he has not served as an advisor on any banking or finance issues.