Did Trump's Border Wall Plan Actually Make Mexico Pay? A Deep Dive into Tariffs and Their Impact

Introduction

During his 2016 presidential campaign, former US President Donald Trump promised to make Mexico pay for the proposed border wall by increasing import taxes on Mexican goods. The idea centered around the notion that the additional taxes would be paid by Mexican importers, eventually leading to Mexico "paying" for the wall. However, the reality of tariffs is more complex, and subsequent events have not supported this original claim. This article delves into the mechanics of tariffs, their impact on American consumers, and whether Trump's promise came to fruition.

Understanding Tariffs

Tariffs, or import taxes, are applied by a government to foreign goods entering their country. These taxes are added to the price of goods to reduce imports and often to protect domestic industries from foreign competition. In the context of Trump's campaign promise, tariffs were seen as a way to penalize Mexico for its alleged immigration issues while also raising funds for the wall.

The Impact of Tariffs on Prices

Consider a simple example: If a laundry basket made in Mexico is purchased for $10 and a 10% import tax is imposed, the cost to the buyer increases to $11. This is because the seller must pass on the additional cost to maintain their profit margins. Therefore, the buyer—in this case, an American consumer—carries the burden of the increased tariffs.

This explanation reveals several key points:

Consumers, not Mexico, pay for the tariffs. The import tax leads to inflation, reducing consumers' purchasing power. Domestic manufacturers are not significantly impacted, as import taxes do not address the cost of production, which is generally higher in the United States. An increase in tariffs on multiple goods can lead to higher inflation, forcing consumers to seek wage increases just to maintain their standard of living. This can result in a significant decrease in the standard of living for many, especially those unable to secure wage increases.

The Ineffectiveness of Trump's Policy

After winning the election, Trump's administration did implement tariffs on various imported goods from Mexico, including aluminum and steel. However, this did not translate into the Mexico paying for the wall as Trump had promised. In fact, a significant portion of the money for the wall was not derived from these tariffs.

“You don’t remember he collected all the money to build the wall but only built two miles in 4 years now he needs another four years to build another two miles of wall. The rest of the money he took it.”

This quote underscores the inefficiency of Trump's approach. Despite collecting billions of dollars in tariffs, the progress on the wall was minimal. More importantly, the tariffs did not directly fund the wall, as many of the funds were withheld or mismanaged.

Economic Impact on Consumers

From 2018 to 2020, the US imported $40.6 billion in goods from Mexico. The imposition of tariffs did lead to increased prices for consumers, but the benefits to the US economy were minimal. In 2018, the US trade deficit with Mexico widened to $64.4 billion, indicating that the tariffs did not fulfill their intended purpose of reducing the trade gap.

The tariffs also had a ripple effect, causing inflation and calling into question whether American workers would benefit from a higher standard of living. Instead, many workers found themselves squeezed by rising prices and stagnant wages. This exemplifies the complex nature of economic policy and its impact on consumers.

Conclusion

Donald Trump’s promise to make Mexico pay for the border wall through increased import taxes was an oversimplistic and ineffective approach to addressing the larger issue of the US-Mexico trade relationship and immigration. Tariffs did increase the cost of imported goods and lead to inflation, but they did not achieve the desired outcome of funding the wall. Instead, the additional costs were borne by American consumers, leading to a decrease in their standard of living.

The lesson here is that economic policies, especially those promising simple solutions, must be carefully evaluated for their broader impact. The case of Trump’s tariffs on Mexican goods serves as a cautionary tale, highlighting the need for nuanced and thorough policy-making in the face of complex economic challenges.