Trump floats 20% tax on Mexican imports to pay for wall, but considering other options

Posted at 3:48 PM, Jan 26, 2017
and last updated 2017-01-26 18:10:49-05

(CNN) — The White House on Thursday said President Donald Trump is considering a 20% tax on imports from Mexico to pay for a southern border wall, but that the President is still weighing other options.

White House press secretary Sean Spicer told reporters on Air Force One Thursday that Trump was backing the proposal and had just discussed it with congressional Republicans in a private meeting.

Hours later, amid an uproar from lawmakers on both sides of the aisle, Spicer said that he was simply putting forward one idea Trump is considering to show how the administration could fund the multibillion-dollar construction of a wall on the US’s southern border. Spicer repeatedly said the White House was aiming to be “illustrative” rather than “prescriptive” as he walked back the more definitive comments he made earlier Thursday.

White House chief of staff Reince Priebus also told reporters the White House is considering a “buffet of options” as it considers how to pay for the border wall.

Peña Nieto Meeting canceled

The discussion over an import tax to pay for the project comes after Mexican President Enrique Peña Nieto canceled a planned meeting with Trump after the US president signed an executive order Wednesday kicking off the process of building the border wall and vowed once again to force Mexico to pay for it — something Mexico has adamantly rejected.

Spicer also said Thursday evening that revenue from a tax on Mexican imports or other revenue streams that didn’t involve a direct payment from the Mexican government would fulfill Trump’s campaign pledge to compel Mexico to pay for the border wall.

The White House press secretary rebuffed questions from reporters about the impact of a 20% tax on imports from Mexico on American consumers, insisting such criticism was “short-sighted.” Businesses that manufacture US consumer goods in Mexico would inevitably pass on an import tax to American consumers, who could see the price of many goods soar.

Spicer first said Thursday that Trump was on board with a plan by congressional Republicans to tax imports from Mexico as part of broader comprehensive tax reform legislation to help pay for the border wall.

“By doing it that we can do $10 billion a year and easily pay for the wall just through that mechanism alone. That’s really going to provide the funding,” Spicer had said, referring to a 20% tax. According to the Office of the US Trade Representative, Mexico’s exports to the US in 2015 was valued at $316.4 billion. The trade deficit is estimated to be $50 billion.

That alternative route appears to be lodged in raising a massive import tax on goods exported from Mexico to the US — a tax that could cause the price of US consumer goods produced in Mexico to skyrocket.

Despite the controversial nature of the proposal, which is likely to be met by stiff opposition from business leaders in the US, Spicer said the proposal is one “we’ve been in close contact with both houses (of Congress) in moving forward and creating a plan.”

“It clearly provides the funding and does so in a way that the American taxpayer is wholly respected,” Spicer said Thursday.

Spicer dodged reporters’ questions about the impact of the border tax on American consumers, instead stressing the tax’s benefits for American workers.

“I’m not going to get into it,” he added when pressed about businesses that manufacture goods in Mexico passing along the tax to American consumers.

Hill Republicans react

Several Republicans expressed concern about Trump’s growing feud with Mexico, worried that the new President is starting a trade war with one of the country’s most significant trading partners — and could drive up the debt in the process.

GOP officials are particularly worried about effectively closing off the border with one of the country’s largest trading partners, while alienating Hispanic voters in the process.

“Many unanswered questions about proposed “border adjustment” tax,” tweeted Sen. John Cornyn, R-Texas, said.

Sen. Lindsey Graham, R-South Carolina tweeted: “Border security yes, tariffs no. Mexico is 3rd largest trading partner. Any tariff we can levy they can levy. Huge barrier to econ growth. Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad.”

Sen. John McCain, R-Arizona also expressed concerns about NAFTA.

“While renegotiations could help to strengthen and modernize NAFTA to benefit American businesses and consumers, any effort to restrict or impose new barriers on our ability to trade with Mexico and Canada could jeopardize the future of this trade agreement and have serious consequences for Arizona and the country,” McCain said in a statement.

House Freedom Caucus Chairman Mark Meadows, asked about Trump’s proposed tax on Mexican imports to pay for the border wall, didn’t embrace the idea.

“Generally speaking I’m not in support of tariffs and taxes. At the same time I don’t want to hamstring the administration,” Meadows said. “Obviously we are going to look at a number of ideas to make sure that our border is secure — at the same time throwing out an idea and necessarily settling on that are two different things.”

Meadows added: “As a matter of general principle I’m not for tariffs.”

“There’s always the potential for retaliation which normally doesn’t support good economic growth of either country,” Meadows said.

Ohio Republican Rep Jim Jordan, a leading House conservative, asked about offsetting the cost of the border wall, said before he decided if he could vote for the proposal from the Trump administration, said it was important to consider the impact on the deficit.

Also, Republicans are expressing deep concern about Trump’s threats to pull out of NAFTA, urging him to mend the relationship with Mexico.