Trump border wall tariff would hurt Detroit 3
Washington — The White House said Thursday that President Donald Trump would consider paying for a border wall with Mexico – estimated to cost up to $15 billion – by imposing a 20 percent tax on imports from Mexico.
If Trump proposed such a plan and it were approved by Congress, it would deal a blow to Detroit’s three automakers, which have factories in Mexico to export vehicles not only to foreign countries but also to the United States. It is among a buffet of options under consideration, administration officials stressed later Thursday.
The plan would require withdrawing from the North American Free Trade Agreement, under which most goods including vehicles traded between the two countries face no tariff.
The announcement came on the same day that Mexican President Enrique Peña Nieto canceled a meeting with Trump that had been scheduled for next week, over tensions stemming from Trump’s plans to build the border wall.
“Right now, our country’s policy is to tax exports and let imports flow freely in, which is ridiculous,” White House Press Secretary Sean Spicer said abroad Air Force One as the president returned from a speech to Republican lawmakers in Philadelphia.
“By doing it that way, we can do $10 billion a year and easily pay for the wall just through that mechanism alone,” Spicer said.
“It clearly provides the funding and does so in a way that the American taxpayer is wholly respected.”
At least one member of Michigan’s congressional delegation, Republican Rep. Justin Amash of the Grand Rapids area, indicated his opposition to a border tax.
“This would be a tax on Americans to pay for the wall. When and how will Mexico reimburse?” Amash tweeted Thursday after Trump’s proposal became public.
The libertarian-leaning Republican was more emphatic in Dec. 4 tweets how Trump’s original 35 percent tariff would hurt Americans.
“This would be a 35% tax on all Americans – a tax that especially hurts low-income families. Maybe the slogan should be #MakeAmericaVenezuela,” he said.
“American consumers are taxed even if no companies move. Tariff increases production costs & limits competition. This is basic economics.”
South Carolina U.S. Sen. Lindsey Graham, a former GOP presidential candidate, also doubted its prospects, noting on Twitter that any tariff that America levies, Mexico can levy on American exports.
“Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad,” Graham tweeted.
No details on tariff idea
Spicer did not provide details about the tax proposal or how it would work. During his campaign, Trump discussed imposing a tariff from 5 percent to 35 percent on products built in Mexico by U.S. companies that fired American workers or shut down factories in the states.
Spicer stressed the border tax would bring the United States in line with the way other countries treat American products. He said the White House has discussed the proposal with both chambers of Congress as part of a broader plan for comprehensive tax reform.
“This is the beginning of this plan to make sure it is done right,” Spicer said.
Asked if Trump would expand the tax beyond the southern border to other trading partners, Spicer said, “Right now, we are focused on Mexico.”
“I think, as we look comprehensively at our trade situation and countries that we have a deficit for, this is something the president has been talking about holistically,” he said.
Imports from Mexico to the United States in 2015 were valued at $316.4 billion, according to the Office of the U.S. Trade Represetative. The U.S. goods trade deficit with Mexico was estimated at $58 billion for the same year.
Trump first deviated from his standard call for a 35 percent tariff in a July 27 interview with The Detroit News in Toledo.
“It would be 35 percent, it may be 10 percent, it may be five percent, it may be 20 percent,” he said before the Ohio campaign rally. “We determine what the tariff will be. But when companies leave Michigan or they leave Ohio and they go to Mexico and they think they’re going to sell product into our country with no tax, they’re wrong about that.”
Trump reiterated without prompting in a Sept. 3 Detroit News interview in Detroit that the tariff was negotiable, saying “it doesn’t have to be 35 percent, it could be 10 percent.”
Trump has also said he’ll renegotiate NAFTA, which Detroit automakers have used to send U.S.-made parts to Mexico, where companies take advantage of lower wages to assemble cars. As a result, those vehicles cost less, and automakers sell more cars – and more parts made by higher-wage U.S. workers, trade experts say.
Impact on automakers
General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV declined comment on the 20 percent tariff idea after it became public. The chief executives of the three automakers met Tuesday with Trump at the White House, where the president promised regulatory and tax relief.
Fiat Chrysler CEO Sergio Marchionne cautioned in an earlier Thursday earnings call that dismantling NAFTA could have “monumental consequences” for the industry.
“The question about repatriation of all of the manufacturing footprint into the United States has got monumental consequences to the industry overall,” he said. “I think there are repercussions that go well-beyond FCA.”
Marchionne also raised concerns about the potential “asymmetrical treatment” of some of Trump’s proposals — especially on the “border tax side.”
Fiat Chrysler Chief Financial Officer Richard Palmer said Thursday the company’s globalization of the Jeep brand, which includes producing its all-new Compass in Mexico for the United States, would likely help offset any sort of increased tariff.
“We are making Jeeps for global distribution out of the U.S. ... I think we have possibilities to continue to improve that position and help our overall impact on any border-tax impact,” he said.
A spokesman for GM declined to comment Thursday, saying not enough details about the border tax idea were known to discuss any possible impact on the company.
In a Thursday earnings call, Ford Chief Financial Officer Robert Shanks said a border tax wouldn’t hurt the Dearborn automakers as much as its competitors.
“So, it could have an adverse impact in terms of them if what we see now as a proposal passes through,” Shanks said, according to a transcript. “And for us it looks pretty attractive actually, not having too much impact at all over the next several years in terms of our cash taxes.”
In a speech Wednesday, Pena Nieto condemned Trump’s decision to build a border wall and repeated his pledge that Mexico would not pay for it, despite Trump's avowals that it would.
Pena Nieto tweeted Thursday that he had informed the White House he would not attend Tuesday’s scheduled summit with Trump.
Staff writers Keith Laing, Michael Wayland and Melissa Burden contributed.