A 20 percent border tax on imports from Mexico could spark a retaliatory tax on U.S. exports and possibly a broader trade war that would hurt Georgia, warned one veteran economist.
“Georgia is very dependent on international trade,” said Jeff Humphreys, director of the Selig Center for Growth at the University of Georgia’s business school. He said about one in 12 jobs in the state is directly or indirectly dependent on Georgia’s ports, for instance.
The Trump administration on Thursday floated the import tax as a possible way to make Mexico pay for the border wall it has pledged to build.
Humphreys said a Trump tax on Mexican imports could go viral with a retaliatory tax by Mexico and then a broader wave of import duties with other countries, hurting trade, jobs and the economy.
“The problem,” he said, “would be the unintended consequences.”
Trump spokesman Sean Spicer, discussing the idea with reporters, said a 20 percent tax on annual Mexican imports would raise $10 billion a year, easily funding a border wall estimated to cost between $8 billion and $20 billion. The value of imported goods from Mexico in 2015 was $296 billion. Spicer said 160 other nations already tax imports.
Congress would have to approve, and no firm proposal has been made. White House Chief of Staff Reince Priebus later said the idea was part of a “buffet of options.”
According to the Georgia Department of Economic Development, Mexico is the fourth-largest source of imports to Georgia, with almost $6.1 billion worth of goods in 2014. Top imports include insulated wire, TVs, motor vehicles, refrigerators, freezers, piston engines, lamps and light fixtures.
Mexico is also Georgia’s third-largest export market, with $3 billion in exports in 2014, the latest figure available. Mexico is a key market for Georgia’s peanut and kaolin clay producers, along with various manufacturers.
“There are two ways we would get impacted,” Humphreys said. Retailers’ and manufacturers’ costs would go up on products, parts and supplies imported from Mexico, raising their costs as well as prices paid by customers.
Second, Mexico would likely retaliate with a similar import on U.S. exports to that country, he said. That would raise the cost of U.S. products sold in Mexico, denting demand and possibly hurting jobs at U.S. producers.
— The New York Times contributed to this report
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