June 5, 2019

Dirty, Rotten Tariffs

Story by Risa Peris

In the midst of a trade war with China, Trump has started a trade war with Mexico. He has threatened to implement a 5% tariff on all imports from Mexico if they don’t stem the flow of migrants into the USA. Republicans are not unanimously behind Trump. As of June 5, 2019 Trump is still in Europe and Republicans are trying to deal with questions regarding the tariffs.

Some Republicans think it’s a mad idea since Mexico is our largest trading partner. However, Trump denied any Republicans were against his plan in a press conference in the UK, while standing next to the soon departing Theresa May. Trump called the Republicans foolish if they don’t back him.

Tariffs are a blunt weapon Trump has been wielding for the past few months. It began with China but it has filtered to other countries and now it has reached our biggest trade partner, Mexico. The Mexicans seem willing to negotiate and sent a delegation to Washington to discuss the matter.

We can see the effect of tariffs on US farmers by our trade war with China. Trump had approved a $16 billion dollar payout to farmers to ease the burden of the tariffs. Trump declared the money would be recouped from fees paid by China. However, that is not how tariffs work. It is the American consumer who is paying the tariff.

Tariffs are essentially taxes on goods and are an old trade policy dating back to the 1700’s. Tariffs are complex depending on the good or size of the country you are levying against. Tariffs are essentially a tax levied on an imported good and the importer pays the tax, which they can either do nothing and lose money or raise the price of the good and spread the cost to the consumer. Tariffs can be protectionist and are useful for foreign competition. One of the main problems with tariffs is that countries can retaliate with their own tariffs. You have to ask yourself: ‘are the gains bigger than the losses?’ With a large trading partner like China and Mexico, the losses likely surpass the gains.

Trump is not threatening tariffs on Mexico for economic reasons but political reasons. He wants them to stem the flow of migrants crossing the border. Trump threatened that tariffs could reach 25% by October if migration does not stop. Who will bear the burden of the tariffs is the American consumer. Trump seems to think tariffs are something the Mexican government will pay to the US Treasury. Tariffs are not a long term solution to a political problem. They can be a temporary solution to bring countries together to negotiate. Trump doesn’t seem to realize that.

What can Mexico do? The US wants Mexico to stop asylum seekers (asylum seekers are legal under national and international law), enforce their border with Guatemala, and stop corruption at immigration checkpoints. Mexico could, theoretically, do all these things. Will they? Won’t they? Or is the problem even more complex than Trump and our government grasps? Whatever the case, needless tariffs in a good economy are dirty, rotten and ineffective. If tariffs were a good economic weapon, why are we paying subsidies to farmers because of our needless trade war with China? The Republicans need to block Trump’s move for the stability of the economy and seriously negotiate with Mexico on the economy and migration.

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