A border tax could lead to 'unexpected consequences' — and retailers think Americans will pay
On Thursday, Sean Spicer, the White House press secretary, told reporters that the Trump administration is considering a 20% border tax on all imported goods coming from Mexico to help pay for the construction of a border wall.
The proposed tax, if enacted, would increase the cost of importing everything from vehicles to fresh vegetables.
That cost, according to experts, would undoubtedly be passed on to American consumers.
"The notion that Mexico is going to pay for this is wrong. This is going to be paid for by American consumers," David French, the senior vice president of the National Retail Federation, said of Trump's plan in a statement.
The NRF has said that prices for apparel and electronics from Mexico could skyrocket as much as 15% on day one if a border tax were implemented, Fortune reported.
Though President Trump has repeatedly said he would force Mexico to pay for the wall, Edward Alden, a trade expert at the Council on Foreign Relations, told CNN Money that the tariff would end up costing Americans.
"The notion that a 20% tariff is a way of forcing Mexico to pay for the wall, it's just a falsehood. It's a way of forcing American consumers to pay for the wall," Alden said.
Republican Senator Lindsey Graham spoke out against Trump's plan on Twitter, saying it would drive up the cost of Mexican-made goods like Corona and margaritas.
Restaurants that import fresh fruits and vegetables from Mexico could be hit hard by an import tax.
A spokesperson for Chipotle, which buys many of its avocados from Mexico, said the company was not prepared to speculate on how a border tax could impact its restaurants. In the past, the chain has said it could raise prices or even pull certain items from the menu if costs increase.
A 20% border tax is just one of the options the Trump administration is considering.
Another plan being pushed by House Republicans is a border adjustment tax — a more complex plan that would serve as part of a wider corporate tax revamp. The border adjustment tax has received similar criticism.
"That type of adjustment proposal in the House, it's a pretty dramatic change," William Dudley, the CEO of the Federal Reserve Bank of New York, said at an NRF-sponsored conference earlier in January. "I think that it will probably lead to a lot of changes in the value of the dollar, the prices of imported goods in the U.S. I'm not sure that that would all happen very smoothly and I also think there could be lots of unintended consequences."
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