Reality Check: If Mexico Pays for President Trump’s Border Wall, Business Pays Too
Policymakers and lobbyists in Washington are still scratching their heads over the Trump team’s floating of a 20% tax on Mexican imports to fund construction of a border wall. By its timing on Thursday afternoon, the proposal appeared to come as the latest escalation of a budding feud between the new administration and our southern neighbor: After Trump signed an executive order on Wednesday authorizing construction of the wall, Mexican President Enrique Peña Nieto announced midday Thursday that he’d canceled a trip planned for next week to meet with the new U.S. president. But White House press secretary Sean Spicer walked back the tax idea almost as soon as he’d offered it, following up with reporters to state it was just one method among several under consideration to get Mexico to cover the wall’s cost.
“Here’s one way. Boom. Done,” Spicer said. “We could go in another direction. We could talk about tariffs.”
It seems likely that Spicer meant the White House is warming to a House Republican plan that would impose a 20% tax on all imported goods. Earlier this month, Trump panned the idea, known as a border adjustment tax, as “too complicated.” The House GOP is still drafting their proposal, but it already faces stiff opposition from major importers, including retailers and oil refiners, and skepticism from Senate Republicans. The approach at least has the political upside of presenting the White House with a path to declaring a win on a key campaign pledge: There’s no easy way to get Mexico to pay for a wall it doesn’t want built, and while the tax tweak would apply indiscriminately to imports from everywhere, the administration could argue collections from levies on Mexican goods subsidized the wall.
The alternative that Spicer named—tariffs—are another story. Trump in December threatened to slap a 35% tariff on imports from American companies that ship operations abroad. That isn’t how tariffs work, since they’re applied to product categories, not goods from individual companies. And if Trump decides to pursue them, he’ll soon find out he doesn’t have much more authority to impose tariffs unilaterally than he does to change the tax code.
Absent a war or a state of national emergency (which Trump could declare as a precondition—”technically that’s possible, but it’d be pretty extreme,” says Frank Samolis, co-chair of the international trade practice at Squire Patton Boggs), the president would likely be limited by the 1974 Trade Act to a 15% maximum tariff that expires after six months, unless Congress decides to extend it. And Republican lawmakers from both chambers are expressing deep concerns about Trump’s inclination to wield what tariff authority he does have. House Majority Leader Kevin McCarthy (R-Calif.) last month said he worried it could precipitate a trade war. Earlier this month, Sen. Mike Lee (R-Utah) introduced legislation to require the president to go through Congress before imposing a tariff or withdrawing the U.S. from the North American Free Trade Agreement.
Which is to say, as it already feels stale to say, Trump is swiftly discovering translating campaign pledges into policy is easier said than done.