Trump’s Latest Mexico Tariffs Could Cost US Consumers $93 Billion

Trump’s Latest Mexico Tariffs Could Cost US Consumers $93 Billion


President Trump abruptly announced on Thursday new tariffs on goods imported from Mexico, which he said were intended to pressure the country to stop the flow of immigrants across the U.S. southern border.

A 5% tariff will go into effect on June 10 and rise 5% each month until it reaches 25%, Trump said in a tweet. The tariffs will continue “until the Illegal Immigration problem is remedied,” the president wrote.

Defending the tariffs Friday, Trump seemed to expand his argument beyond immigration, citing the trade deficit and drug trafficking as issues he was also targeting. “Mexico has taken advantage of the United States for decades,” Trump tweeted.

“Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. … In order not to pay Tariffs, if they start rising, companies will leave Mexico, which has taken 30% of our Auto Industry, and come back home to the USA. Mexico must take back their country from the drug lords and cartels. The Tariff is about stopping drugs as well as illegals!”

The surprise move rattled markets Friday, and drew criticism from numerous and varied sources. Here’s a roundup of comments and reactions:

Billions in added costs: CNBC’s Jeff Cox did some quick math on how much the tariffs could cost: “Based on 2018 trade numbers, in which the U.S. imported $371.9 billion from Mexico, that would equate to a tax on U.S. consumers that would start at $18.6 billion and escalate to just shy of $93 billion.”

Key Republicans not on board: Multiple lawmakers said they oppose the new tariffs, including several Republicans. Sen. Chuck Grassley of Iowa said in a statement, "Trade policy and border security are separate issues. This is a misuse of presidential tariff authority and counter to congressional intent." Grassley added, "I support nearly every one of President Trump’s immigration policies, but this is not one of them.”

Sen. Pat Toomey (R-PA) commented, “The president’s use of tax hikes on Americans as a tool to affect change in Mexican policy is misguided. It is past time for Congress to step up and reassert its Constitutional responsibility on tariffs.”

Big business registers a complaint: The Business Roundtable released a statement saying, “Imposing unilateral tariffs on Mexican imports would be a grave error. Business Roundtable strongly urges the Administration not to move forward with these tariffs, which would create significant economic disruption and tax U.S. workers, farmers, consumers and businesses.”

U.S. automakers are particularly vulnerable: If the tariffs were to fully take effect, they would “cripple” American car manufacturers, according to analysts at Deutsche Bank. U.S. automakers, who are highly dependent on Mexican imports, would face $23 billion in increased costs, resulting in an average price hike for consumers of $1,300 per vehicle.

Even Trump’s top trade adviser is opposed: The Wall Street Journal’s Vivian Salama and William Mauldin report that U.S. Trade Representative Robert Lighthizer argued against the new tariffs, saying they would make it harder to ratify the new U.S.-Mexico-Canada Agreement, which is meant to replace NAFTA. Chris Krueger of Cowen Research underlined that point: “In the space of a few hours last night, Trump overturned all we thought we understood about the near term direction of the Administration’s trade strategy,” Krueger wrote. “Trump unveiled a one-two punch that we believe will make USMCA extremely hard to pass in both Mexico and the U.S.”

Taking back the tax cuts: Joseph Brusuelas, chief economist at RSM, tweeted, “Policy incoherence in action: Increasing taxes to 25% on all Mexican imports would yield $86.6 billion. That would offset more than half of the fading effects of the 2017 TCJA which was designed to boost productivity enhancing investment. Real economy will pay the price.”

Losing credibility: “I don’t see how our trading partners will continue to negotiate with us as if we have any credibility going forward,” Emily Blanchard, a trade economist at Dartmouth, told The New York Times’ Neil Irwin. “They’re going to have a much harder time selling any costly domestic reform or sacrifice that is a concession to the U.S., because the U.S. is acting like an erratic bully.”

Is it just a distraction? Some critics speculated that Trump’s move served as a distraction from bad press surrounding the Mueller investigation, and that Trump would withdraw the tariffs this summer, when immigration levels across the southern border tend to fall due to the heat. Vox’s Matthew Yglesias wrote that “six to eight weeks from now, Trump should have a pretty easy off-ramp from this policy and an opportunity to declare victory even if the concessions he manages to wring from Mexico are relatively minor.”

Immigration hardliners applaud: Some Trump supporters see the move as long overdue. “President Trump went out of his way to work with Mexico to alleviate this crisis,” former White House adviser Stephen Bannon told The New York Times. “They failed to act. Now he dropped the hammer. The ratcheting up to 25 percent will get their attention.”