President Trump has now come up with a plan to make Mexico pay for his much-ballyhooed wall along the U.S.-Mexico border. One big problem, however, is that his plan doesn’t make Mexico pay for the wall. Instead, it makes Americans pay for his wall.
Trump’s proposal is to impose a 20 percent tariff on goods imported from Mexico. In Trump’s mind, that would mean that Mexicans are paying for his wall because the tax will be on items that are being produced in Mexico.
In actuality though, the tariff is just like a sales tax that Americans are required to pay when they purchase goods at a local level. The difference is that this is a sales tax on goods produced in Mexico. But it is Americans who are paying the tax, not Mexicans.
Isn’t that interesting? Among the first things that a conservative president does when he comes into office is to force another tax onto hard-pressed American taxpayers.
Here’s another interesting aspect of Trump’s tariff plan: It will inevitably put some or many Mexican firms out of business. A 20 percent tariff will mean a reduction in demand among American consumers for Mexican goods. Those Mexican firms that are barely making it will go under as a result of reduced demand for their goods. That means increased economic hardship for Mexico.
There is another factor to consider. Trump is exhorting and threatening American firms who are moving operations to Mexico. That also means increased economic hardship for Mexico.
With Mexican firms going out of business and American firms operating in Mexico closing down, that will mean worsened economic conditions and increased unemployment in Mexico.
What is that important?
For the obvious reason: It will mean more illegal migration into the United States from people seeking jobs and economic prosperity — i.e., the exact opposite of what Trump and the anti-immigrant crowd want.
That’s one trouble with Trump and his supporters — sometimes they just don’t think. If they want to decrease illegal immigration, then doesn’t it stand to reason that the way to accomplish that is to encourage economic prosperity in Mexico? The more prosperity, the less incentive people have to leave home and go thousands of miles northward to a foreign country in search of work.
So, how can America encourage economic prosperity in Mexico? Through total free trade, including the exercise of the free, unrestricted right of American firms to move operations to Mexico and open operations in Mexico, as well as the exercise of the free, unrestricted right of Mexican firms to export and sell whatever they want into the United States.
Would total, unrestricted free trade cure all that ails Mexico? No more so than it would cure all that ails the United States. There is still all the socialism, interventionism, and regulation that afflict both nations, not to mention the warfare-state problems of the United States. But there’s no doubt that unrestricted free trade between Mexico and the United States would go a long way to restoring friendship, peace, prosperity, and harmony between Mexico and the United States.
Jacob G. Hornberger is founder and president of The Future of Freedom Foundation.
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