Spicer: 20% Tax on Mexico Imports Still Just an Option

Spicer: 20% Tax on Mexico Imports Still Just an Option
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It was the shortest trade war in a young presidency.

President Trump warmed to the idea of a proposed 20 percent tax on all goods brought into the United States from Mexico to pay for his administration’s proposed border wall, his spokesman said Thursday before backtracking to say the concept remains an option rather than a policy endorsement.

Trump, who met with House and Senate Republicans in Philadelphia at a GOP retreat, greeted a border tax as one potential ingredient in a GOP tax reform package conservatives hope to enact this year, White House Press Secretary Sean Spicer told reporters aboard Air Force One on a return flight from Pennsylvania. 

Spicer later walked back the controversial idea that a tax on imports from Mexico was the proposal embraced by the president to find revenues to build a wall. In his West Wing office, surrounded by perplexed journalists seeking clarification after news organizations published initial reports based on his earlier comments, the president’s spokesman mopped up.

“The idea is to show that generating revenue for the wall is not as difficult as some might have suggested. One measure alone could do this,” Spicer said. “Here’s one way. Boom. Done. We could go in another direction. We could talk about tariffs. We could talk about other custom user fees. There are a hundred other things.”

Earlier in the day, GOP lawmakers indicated they were lukewarm about a proposed border adjustment tax that retailers oppose and which others fear would raise oil prices and pass costs along to U.S. consumers. Trump is eager to nudge Congress to act more swiftly on his legislative agenda, which includes repeal and replacement of the Affordable Care Act; tax reform; elements of his immigration agenda, including the wall; and confirmation of a Supreme Court nominee to be announced next week.

House Ways and Means Committee Chairman Rep. Kevin Brady, who met with Trump before the inauguration, has said his idea of a border adjustment tax would produce multiple benefits for U.S. businesses and workers who are trying to compete against trading partners. To cut corporate and individual tax rates, Republicans must find an offsetting revenue source. The Tax Foundation, a conservative think tank, estimates that if Congress made business taxes “border adjustable,” the change could raise $1.1 trillion over a decade.

Brady was to meet with the president again at the White House Thursday, along with Senate Finance Committee Chairman Orrin Hatch. The Hatch-Brady meeting, described as a planned discussion of trade issues, was canceled without explanation.

Brady’s proposal would tax imports that cross the Mexican border into the United States, and exempt exports. Before his inauguration, Trump called the Brady proposal “too complicated” in a Wall Street Journal interview.

On Thursday, GOP lawmakers endorsed the wall Trump announced along the southern border with Mexico and committed to appropriations of $15 billion to $18 billion to cover the costs. A wall completed along nearly 2,000 miles of shared border is estimated to cost that much or more. Some estimates for the multi-year construction project run $25 billion and higher.

Trump has repeatedly promised Americans that Mexico would pay for the wall “one way or another.” The Mexican government has dismissed the physical barrier as an expensive folly and said Mexico would not reimburse U.S. taxpayers, as Trump pledged it would.

Mexico, the United States and Canada are party to the North American Free Trade Agreement, which Trump has said he wants to renegotiate or abandon. If Trump officially endorses the border adjustment tax, it is unclear if he would trigger the U.S. exit provision in the NAFTA pact first. Mexico would be sure to react negatively and could take its complaints to the World Trade Organization. 

“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 told reporters during Trump’s maiden flight on Air Force One.

Spicer said the proposed import tax would be levied on countries with which the United States has a trade deficit, potentially expanding the country-targets beyond just Mexico.

“If you tax that $50 billion at 20 percent of imports – which is, by the way, a practice that 160 other countries do – right now our country’s policy is to tax exports and let imports flow freely in [to the country], which is ridiculous,” the president’s spokesman said.

“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,” he added.

Brady has championed the merits of his proposal in recent interviews. "For the first time, we'll be on a level playing field with China and our competitors,” he told CNBC last week. “For the first time, we'll have eliminated any tax incentives to move jobs or research or headquarters overseas."

The U.S. goods trade deficit with Mexico – America’s third-largest trading partner -- was $58 billion in 2015, according to the Office of the U.S. Trade Representative. The total U.S. trade deficit with all countries at the end of 2015 was nearly $532 billion.

Trump was scheduled to meet at the White House with Mexican President Enrique Pena Nieto Jan. 31 to discuss trade and NAFTA, immigration and the proposed wall. But he abruptly canceled the White House event less than 24 hours after saying, “I think our relationship with Mexico is going to get better.”

“The U.S. has a 60 billion dollar trade deficit with Mexico,” Trump tweeted Thursday morning. “It has been a one-sided deal from the beginning of NAFTA with massive numbers of jobs and companies lost. If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting.”

GOP Sen. Lindsey Graham of South Carolina, who failed to capture the GOP presidential nomination, may have nabbed Twitter’s last words on the subject, at least for Thursday.

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

Alexis Simendinger covers the White House for RealClearPolitics. She can be reached at asimendinger@realclearpolitics.com.  Follow her on Twitter @ASimendinger.

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