Beer, snacks and cars: How a 20% Mexico tariff could cost US shoppers

If a proposal floated by President Trump to impose a 20% tariff on Mexican imports goes into effect, American consumers may have to pay more for products ranging from Toyotas to vegetables to beer.

Mexico is currently U.S.’s third largest partner in the trade of goods, according to the U.S. Trade Representative and Trump has raised the idea of the new tax as a possible way to finance a wall that would straddle the border separating the two countries.

“The irony of putting a tariff on Mexican goods is that, to the extent it raises consumer prices in the U.S., consumers will be paying for the wall, not Mexican producers,’ while a stronger dollar could minimize the pain U.S. shoppers feel, says William Gale, co-director of the Tax Policy Center.

The office of the Trade Representative says that Mexico sent $295 billion worth of goods across the U.S. border in 2015. That year, U.S. imports from its southern neighbor peaked at $316.4 b on the over all. In contrast noting a total value of $267.2 billion is the Mexican-bound exports from the U.S.

Including hundreds of thousands of Chevrolet and Ram trucks, as well as Volkswagens, Fords, Hondas, Nissans and other brands that are assembled in Mexican factories, the biggest import are cars, with the U.S. spending $74 billion in 2015.

But there are many other products that are imported by the U.S. from Mexico apart from cars. Machinery, medical instruments, and mineral fuels are among the other key categories imported. With imports amounting to $21 billion in 2015, Mexico is also the U.S.’s second-biggest provider of agricultural products.

“It is very troubling for world food and agricultural markets for Administration spokespersons to bandy about terms like a 20% tax on all imports from Mexico or other countries,” Tom Stenzel, President and CEO of the United Fresh Produce Association said in a statement.

“Consider the impact on American consumers of a 20% hike in the cost of foods such as bananas, mangoes and other products that we simply cannot grow in the United States. Consider also what other countries would do to block U.S. exports in retaliation. As the Administration looks to incentivize manufacturing jobs in the U.S., we urge President Trump to consider the unique nature of food and not place a new food tax on American consumers.”

According to the office of the Trade Representative, fresh vegetables purchased from Mexico totaled $4.8 billion in 2015. Processed fruit and vegetables peaked at $1.4 billion two years ago and snack food imports totaled $1.7 billion, while wine and beer $2.7 billion.

A tariff would not only “disrupt Texas commerce with our most important trading partner, but it would raise consumer prices by 20% on many goods, like so much of the fresh produce upon which we rely at this time of year’, said representative Lloyd Doggett, D-Texas.

In order to tap into a skilled labor force and Mexico’s multitude of trade deals with countries across the globe, in addition to the lure of low wages, automakers have flocked across the border.

Services from Mexico in transportation, travel, technology and other industries have been made use of by the U.S. Noting roughly 191% more than what was spent on imported services in 1993, before NAFTA and 11% more than the year before, such imports amounted to roughly $21.6 billion in 2015.

(Adapted from CNBC)

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Categories: Economy & Finance

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