A 20% tax on all imports??? They are insane.
Here's what I understand. Trump is apparently warming to the House GOP's idea of a "border adjustment" component to the U.S. corporate income tax. Border adjustments are apparently typically used in countries that have value-added taxes, which tax domestic consumption. (I haven't heard that we're considering a VAT, although those who favor the "fair tax" would probably prefer it to the alternative of taxing income.)
The House plan would drop the corporate tax rate from 35% to 20%, but with the following border adjustment twist: Companies would be prevented from deducting expenses on imported goods in calculating that lower income tax rate. On the other hand, they would be allowed to exempt exports from their taxable income entirely.
Such a corporate tax rate cut coupled with border adjustment will have winners and losers; it wouldn't be designed to punish Mexico or companies that operate in Mexico, but it will have its greatest impact on countries, like Mexico, with which we routinely run trade deficits.
I'm sympathetic to the idea of APOLITICAL tariffs or border adjustments as described above. For decades, the tax and trading systems have favored consumers at the expense of workers, and that needs to be brought back into balance. Yes, consumer prices would rise, but so would domestic wages and the prospect for better, more permanent jobs.
But it's crazy for Trump to be running his mouth to piss off Mexico for no valid reason. Mexico's not responsible for the recklessness of Trump's campaign rhetoric. Mexico's also not responsible for our illegal immigration problem - that's entirely on us and the needs of our economy. Mexicans come here because American employers want them. They may work cheaper than Americans, but they are also often more reliable and harder-working.
