Mexico Tariff Foolishness

Barring some last minute deal that Trump’s negotiators make with Mexico which at least appear to reduce immigration to the United States next Monday everything imported from Mexico will go up in price by 5%, that’s an extra $180 that the average American family will spend to buy the same beer, avocados, laptop computers, and automobiles. Some other items that will cost more due to Trump’s trade war with Mexico include televisions, phones, medical and surgical instruments, refrigerators and air conditioners, dates, figs, and pineapples. If nothing changes Trump promises that the tariff will increase another 5% every month until it reaches 25% or an extra $900 for those products. Remember that tariffs are taxes so this means Trump is raising your taxes as much as $900 each year.

Compare that $900 tax increase to the income taxes you paid this April 15 versus last year. For the few non-billionaires who actually noticed a reduction in their federal incomes taxes this year most or all of it will be offset by the increases in the price of goods we’re paying on items imported from China and perhaps Mexico. Trump’s argument is that the manufacturers will see it is in their interest to move manufacturing back to the US to avoid the tariffs but that hasn’t been the case when exchange rates shift and it hasn’t noticeably caused the return of manufacturing jobs from China. Instead two things have happened, offshore manufacturers simply moved to another low wage country that isn’t subject to the tariffs or they bring manufacturing back to the US but in highly automated form such that hardly any jobs are created.

Meanwhile US manufacturers like Harley Davidson actually moved some production to Europe so as to avoid retaliatory tariffs imposed by EU nations. Some small US manufacturers have even gone out of business because the tariffs imposed on Chinese goods increased the cost of the materials they used to make their products making them uncompetitive with similar products made in other countries not subject to the same tariffs.

American farmers, especially those growing soy beans, have taken a real beating from Trumps China tariffs. China retaliated by raising tariffs on agricultural products so Chinese buyers found alternate sources of soy beans leaving American farmers with huge surpluses no one wants. Trump’s solution is to give $19 billion in aid to mid-West farmers but that doesn’t come close to making up the price difference so now we’re seeing higher than normal rates of farm bankruptcies in the mid-West. At the same time Trump’s effort to insulate himself from the ire of farmers increases the federal deficit.

In 1930 as the Great Depression was getting wrecking the lives of most Americans, Herbert Hoover signed the Smoot-Hawley tariffs into law exacerbating the damage. Among economists today there is some debate on just how much those tariffs hurt America but there is broad consensus that they did hurt and not help. More than a dozen Republican Senators are ready to vote to disapprove the Mexico tariffs, if they can must 18 they can put a stop to it. John Cornyn has spoken against the tariff but he hasn’t committed to voting against it. He’s up for election in 2020 and it’s likely to be a close race so now would be a good time to call him and let him know you want him to stop the madness and vote against the Mexico tariffs. You can call his San Antonio office at 210-224-7485.

Published in the Seguin Gazette - June 7, 2019