The Trump administration has been threatening to use executive power to unilaterally impose tariffs on Mexico as a policy level to deal with illegal immigration. These 5% tariffs, which could escalate as high as 25%, would be levied on all goods coming into the United States. Ostensibly, this is being used as a bargaining chip to bring Mexico to the table on immigration, but this is wrong in oh so many ways. Using tariffs in this way hurts Americans first and foremost, and using these tariffs to try to “punish” Mexico is not going to lead to the outcomes that the administration is pursuing.
Tariffs punish American citizens. They are a tax that American importers pay, which ends up getting passed on to consumers. Mexican exporters don’t pay a cent to the United States, and any new revenues come directly from American citizens.
Moreover, these trade taxes have been piling up as this administration continues to throw around tariffs left and right. The cumulative impact on Americans from Trump’s trade actions will rise to $151.1 billion once the Mexico tariffs are introduced, a figure which would represent 80 percent of the 2019 individual income tax cuts provided by the Tax Cuts and Jobs Act. Should this 5 percent tariff increase to a 25 percent tariff, the resultant $220.5 billion bill Americans would be left with would well exceed the TCJA’s 2019 individual tax cuts. It also represents by far the largest tax hike on Americans in post-war history.
Yet even setting aside the harm tariffs bring to American citizens, this trade action would be uniquely foolish. While tariffs on China were at least in part related to negative trade actions by Chinese actors, illegal immigration has almost no relevance to trade at all. In fact, the only conceivable connection one could make between trade and illegal immigration is that illegal immigrants are fleeing poor economic conditions to find better ones in the United States — so if anything, harming the Mexican economy through a trade war will likely only encourage illegal immigration!
There’s also the question of the effectiveness of a tariff as a remedy to illegal immigration. Mexico’s government has very little ability to completely halt illegal immigration moving through Mexico, and a trade war won’t suddenly solve the foundational problems in the country that hamper its ability to do so. As Mexico’s president stated in response to the announced tariffs, “social problems are not solved with taxes or other coercive measures.”
Lastly, this tariff is poorly timed. President Trump is in the middle of attempting to move through an agreement to replace the North American Free Trade Agreement (NAFTA) with a new pact called the U.S.-Mexico-Canada Agreement (USMCA). A sudden new tariff, aimed at securing changes to an unrelated policy, will not help that happen. If anything, it is far more likely to jeopardize the agreement entirely.
This sort of undermining of a close trade partner that is in the middle of ratifying a trade agreement also bodes poorly for the United States’s international standing. Stocks plunged in response to the announcement of the new tariffs on Mexico, partly due to fears that China will not trust President Trump to hold to any trade deal he may have made.
If the president wishes to address illegal immigration, there are far less ham-fisted means of going about it than harmful trade taxes on American citizens. President Trump should seriously reconsider further taxes on American consumers, especially for such an unrelated policy goal.
Andrew Wilford is a policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to nonpartisan tax policy research and education at all levels of government.