President Donald Trump has been busy outlining his proposal for not only a border wall with the country of Mexico, but how he plans to pay for such a project, too.
The Detroit News reports President Trump will consider levying a 20 percent tariff on Mexican-made goods coming back into the United States to pay for the border wall. But, economists, analysts and Republican congressional members are showing their displeasement with the idea of a new tariff placed on Mexico.
The 20 percent tariff was among other options being considered to respect taxpayer money, according to White House press secretary, Sean Spicer. Still, opposition has begun to stem, especially regarding the implications it could cause for General Motors, Fiat-Chrysler and Ford.
Republican Rep. Justin Amash of the Michigan congressional delegation said, “This would be a tax on Americans to pay for the wall. When and how will Mexico reimburse?” Republican Sen. Lindsay Graham also reiterated that any tariff the U.S. imposes on Mexico, Mexico can levy on American imports as well.
The basic principle of building components and vehicles in Mexico for U.S. automakers is to take advantage of lower labor costs. In turn, automakers can sell vehicles at lower prices to American consumers, and ideally, sell more vehicles.
GM, Ford and FCA all declined to comment on the proposed 20 percent tariff, but FCA CEO, Sergio Marchionne, did warn of “monumental consequences” over dismantling the North American Free Trade Agreement in general.
“The question about repatriation of all of the manufacturing footprint into the United States has got monumental consequences to the industry overall,” he said. “I think there are repercussions that go well-beyond FCA.”
Specifically referring to the border tax, Marchionne raised concerns over “asymmetrical treatment.”
Ford, though, said a border tax wouldn’t hurt the company nearly as much as it thinks.
“So, it could have an adverse impact in terms of them if what we see now as a proposal passes through,” Ford Chief Financial Officer Robert Shanks said, according to a transcript. “And for us it looks pretty attractive actually, not having too much impact at all over the next several years in terms of our cash taxes.”
In 2015, imports from Mexico were valued at $316.4 billion, while the U.S. trade deficit has been estimated at $58 billion that same year.