Trump’s Wall: Who is going to pay?

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<p style=”margin-top:12.0pt;margin-right:0in; margin-bottom:12.0pt;margin-left:0in;text-align:justify;line-height:200%”>The suggested wall by Trump between the US and Mexico border raises questions on the mechanism to pay for its construction. President Donald Trump, during his presidential campaign promised to construct a physical wall between the United States and Mexico. He suggested that the cost would be paid by Mexico through border tax. According to the White House communication briefing released on January 27, 2017, the president and the Congress are working on the formalities of paying for its construction (Northfield, 2016).&nbsp; This paper will analyze this solution to having Mexico pay for the border wall between the United States and Mexico.&nbsp; One of the means to be used for payment is tax from imports from Mexico coming into the US after carrying out a tax reform. However, imposing the border tax on imports from Mexico will burden the consumer or the US taxpayer and not the companies importing Mexican products since they will transfer the cost to the final consumer thus Americans will be the ones paying for the construction of the wall.</p>
<p style=”margin-top:12.0pt;margin-right:0in; margin-bottom:12.0pt;margin-left:0in;text-indent:.5in;line-height:200%”>One major plan for paying for the wall is to raise the tariffs on imports by imposing a 20 percent tax on imports from Mexico. This means that there must be comprehensive reforms on tax in which the current duties will have to be quadrupled to enable payment of the entire wall. This may force the US traders to source for products from other nations and this may reduce the revenue earned by the government through Mexican tax. The government of Mexico may also respond by getting rid of tax benefits for the US foreign investment, which according to 2013 reports totaled to $101bn (Valenti, Crowley, Kom &amp; Himelson (2017). The president may also utilize laws that prevent money laundering to stop the Mexicans who work in the United States from sending money to their families back in Mexico. The amount that goes to Mexico is about $25 billion and the president&rsquo;s threat may force Mexico to give in to the demands and contribute to the construction of the wall according to Waldman and Waldman (2017). Taxing remittances can also be explored as another option, which could be a flat tax on all or a punitive tax on those that are in the US illegally. However, Mexicans that may be affected by the remittances may avoid the wire transfer and go for undocumented third parties to help in transferring the cash to their relatives. Any tax on imports will lead to a reduction in demand for imports from the US consumers leading to fewer dollars being exchanged with foreign countries. This also imply that the rate of the dollar may go up thus the border adjustment may lead to serious economic effects such as permanent rise in export or reduction in imports. As a result, the ones to pay for the wall will be the American citizens and not the Mexicans as every cost that may arise from any reforms will be passed to them.</p>
<p style=”margin-top:12.0pt;margin-right:0in; margin-bottom:12.0pt;margin-left:0in;text-indent:.5in;line-height:200%”>Another option proposed by the House Republicans is to lower corporation tax by 20 percent from the current 35 % to 20 %, which will then be based on the place of consumption instead of production (Waldman &amp; Waldman, 2017). In this case, the US will tax imports and not exports. However, this will only raise about $12 billion as Mexico suffers a trade deficit. In this case, Mexico cannot do much in raising the revenue needed for the wall construction since any border adjustments will affect trading partners of the US and not Mexico only. Visa and border cross fees may also be increased, which may target nations with bad records on illegal immigration such as Mexico. If individuals and cars that cross the border pay more crossing fees, more funds will be raised although it may not be enough. All these plans aim at ensuring Mexico contributes funds to build the wall separating it from the United States. However, raising taxes for imported goods such as avocados and others from Mexico will force the US companies involved to raise prices affecting the final consumers. This means that even corporation shareholders will pay for the wall although part of it has to be paid by the final consumers. A state such as Texas will be greatly affected since its number one trading partner is Mexico and imposing the 20 percent tax on imports for funding the wall will negatively affect it. It will lead to loss of many jobs and a reduction in the state tax revenues affecting its economic growth (Hooghe &amp; Marien, 2016). The business owners will be forced to raise prices for their goods by about 20 to 30 percent to recover the costs yet the customers are quite price conscious. Smaller businesses in the United State will be affected most since larger companies such as Wal-Mart can outsource their stock from other nations such as China. The 20 percent tariff aimed at forcing Mexico to pay for the border war is a way to force the United States consumers to pay for the wall since the tax with hike the prices of many consumer goods.</p>
<p style=”margin-top:12.0pt;margin-right:0in; margin-bottom:12.0pt;margin-left:0in;text-indent:.5in;line-height:200%”>Import-based tax has several disadvantages to the consumers who pay for the additional prices and do not economic problems. For instance, in 2016 an import duty of 266% imposed on cold-rolled steel from China affected both America and China (Perry, 2017). However, American domestic users had to pay for higher steel prices since they were the users and paid high price for anything containing steel. Again, President Obama introduced a 35 percent tariff on tires imported from China in 2009 due to unfair competition (Perry, 2017).&nbsp; Although the tariff increased sales for American tires, it had negative impacts on the citizens since they paid high prices. In the end, the amount lost in the retail market translated to almost 3,731 job losses (Perry, 2017). This reveals that the tariff that Trump wants to put on Mexican exports will lead to high prices for consumer goods in America and citizens will be the ones to bear the cost of the wall construction. In addition, Mexico and the US depend on one another in various ways since almost six million jobs for the US citizens depend on trading activities with Mexico. If Trump goes on with his planned building of the border wall, it will restrict trade with Mexico and Americans will have to pay high prices for many things including consumer goods. Taxing Mexican imports is forcing the Americans to pay more for anything they buy if imported from the country. This means that if Trump applies tariffs for Mexican products the American companies will bear the costs. Since the business normally passes the price burden to consumers, the final consumer will finally pay for the construction of the wall.</p>
<p style=”margin-top:12.0pt;margin-right:0in; margin-bottom:12.0pt;margin-left:0in;text-indent:.5in;line-height:200%”>Mexicans will not pay for the wall but instead the US consumers will through hiked prices for consumer products. However, Mexico will also suffer since its economy is reliant on trading activities with the US. In fact, most of the goods it exports go to the United States and a big tariff will make Americans avoid buying Mexican products.&nbsp; This will lead to problems with its balance of trade affecting the economy of the nation. Free trade allows nations to produce goods and services that they can at their lowest production cost and export to other nation. However, if Trump goes on with the plan to introduce a 20 percent tariff on imports from Mexico, he will be contradicting the modern economic law. A tariff such as the one being proposed for building of the war will be a burden the Americans and not the Mexicans. Although Mexico will be affected since its exports will go down, it will not pay for the construction of the wall since the ultimate costs of imported goods that will be highly taxed will be transferred to the US consumers.</p>

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