Trump’s tariffs on Mexican products could cost American families up to $900 each.
Whatever President Donald Trump might say, the burden of his planned tariffs on Mexico will be borne by Americans — as much as $900 per household, according to a group of economists Vox surveyed.
The auto industry is by far the most significant casualty; America’s biggest imports from Mexico are cars and auto parts. But data processors, telephones, televisions, and even beer are also moving all the time across the border. Whether it’s a car or a Corona, Americans are going to wind up paying the price for Trump’s trade war.
“The president seems not to comprehend that unilateral tariffs aren’t leverage at all. US tariffs are taxes on American households and businesses, so imposing them will always be an act of self-destruction,” Dan Ikenson, who leads trade studies at the libertarian Cato Institute, told me. “Trump may believe he can dictate demands because the smaller Mexican economy is more dependent on the US economy than vice versa, but make no mistake: Both economies would be hurt significantly by the tariff war being threatened.”
It gets worse. Tariffs land hardest on lower-income Americans, who pay the same cost on many goods as their richer peers. So Trump is, in essence, imposing a regressive tax on his own people.
The president’s argument is that all this additional cost is worth it. The tariffs are necessary to stem migration through the southern border, the singular obsession of his presidency. If the costs get too high, then companies will just relocate to the United States to avoid these tariffs.
In order not to pay Tariffs, if they start rising, companies will leave Mexico, which has taken 30% of our Auto Industry, and come back home to the USA. Mexico must take back their country from the drug lords and cartels. The Tariff is about stopping drugs as well as illegals!
But every economist I spoke with found Trump’s argument to be ludicrous spin.
“I don’t think the United States is a viable location for many of the production activities that are occurring in Mexico,” Kimberly Clausing, an economist at Reed College, told me. “A more likely response would be offshoring to another country, or turning to automation to do those activities in a less labor-intensive way in the United States.”
So instead, Trump will either encourage companies to leave Mexico for somewhere else abroad or hasten a turn toward automation — which is already to blame for much of the pain that old manufacturing towns face and Trump promised to relieve. Worse still, if the tariffs get high enough, they could prompt US companies to start tightening their belts.
As Vox’s Matt Yglesias has written, the political theory behind Trump’s tariffs is clearly deeply flawed. Republicans in Congress don’t seem pleased with the president either. But no matter what, economists say it is American consumers who will be stuck with the bill.
Tariffs are levied on products imported from another country into the United States, based on a percentage of the product’s price. Trump has said he would start with a 5 percent tariff on Mexican imports beginning June 10 and then he plans to increase the tariff every month until they hit 25 percent. Companies importing products subject to a tariff will typically respond by simply raising the price of their products to cover the cost.
So the price of products imported from Mexico is going to rise — with motor vehicles looming largest. Not only are fully completed cars built in Mexico and then shipped to the United States for sale, but particular parts for cars, vans, and trucks also make up much of the inventory moving between the US and Mexico.
