The Political Economic Effects of the U.S.-Mexico Border Wall

The Troubled Relationship between the United States and Mexico

The relationship between the United States and Mexico appeared to be in trouble after Mexico’s president, Enrique Pea Nieto, refused to meet with President Trump after renewed tensions erupted. In response to the snub, the White House proposed a new 20% levy on Mexican imports to cover the proposed USA-Mexico border that Trump had proposed (Borger, 2017).

Trump’s Immigration Policy and Offensive Remarks

Previously, Trump signed two executive orders addressing the construction of a border wall between the United States and Mexico, increased border patrolling powers, and increased the number of immigration enforcement officers. Also, Trump had made offensive and insight remarks to the Mexican people and government labeling with offensive stereotypes of “rapists” and “bad hombre” who were out to take jobs from U.S people (Borger, 2017). Trump’s immigration policy was the backbone of the campaign and had promised that Mexico would pay for the huge cost of building the wall.

The Proposing of Border Tax by the White House

The White House Press Secretary also argued that the proposition of border tax was just a part of the larger tax reforms policies to curb the trade deficit that the U.S is experiencing between its trading partners (Borger, 2017). He justified the 20% taxation to the fact that more than 160 countries practice the trend, and it would be a suitable method of raising funds for the proposed well. The tax proposal brought bewilderment in Washington and sparked various reactions.

Congress’s Role in Passing the Tax Increase Bill

The House of Representatives had viewed it as an approval of their plans for border adjustment tax to aid American exporters (Borger, 2017). Some people like the Chief of Staff, Reince Priebus, were against the proposal and advocated to look for other sustainable alternatives. Nonetheless, while the president can impose tariffs on imports that are believe to threaten the interest of the U.S., eventually, only the Congress can pass the tax increase bill.

The Impact on NAFTA and Mexico’s Economy

The trade policy currently taxes exports from the country, and lets importation of goods move into the country without taxation. The tax-free importation of product was due to the North American Free Trade Agreement (NAFTA) that enter into force in 1994 (Glover, 2017). Trump repeatedly aired his critique on NAFTA branding it as “a terrible deal and a total disaster for the U.S. economy”. The Agreement has played a huge role in the strengthening of the economic ties between the U.S. and Mexico.

Mexico stands as the third-largest good trading partner after China and Canada, with approximately 531 billion dollars in a total of goods traded between the two countries in 2015 alone (Borger, 2017). Also, any tax increase on imported goods will have not only negative implications for Mexico’s economy but also the North American consumers, since it would have a direct effect on the prices of the products. At the end, the American consumers will be the ones paying for the costs of building the wall, hence the proposed taxes would defeat its purpose. Furthermore, Mexico’s economic minister cautioned against the border tax since it could unleash consequences around the world and could result in triggering a global recession.

The Future of NAFTA and the Role of Levies

The tax proposal is crucial, as any efforts the U.S. will make to shorten or imply new bans with its capacity to conduct trading with Mexico or Canada might compromise the future of NAFTA. Since the two economies are very integrated, any levy that U.S. can impose, Mexico can also impose in retaliation. Mexico exports to the U.S. contain nearly 40% U.S. goods, and vehicles that are made in Mexico are composed with parts made in the other NAFTA countries.

Alternative Methods to Curb Illegal Immigration

Other cheaper and cost-efficient methods could be used to curb illegal immigration, other than building the wall and taxing imported goods from Mexico. The use of laser walls supposes to identify objects crossing the field of visibility between the laser generator and the detector and turn on an alarm the second the laser is touched, which is a system used by India (Glover, 2017). Surveillance technologies might be the basics to foreseeing not legal border passing, for example, a mixture of distanced video viewing through buildings’ cameras, air surveillance and net of ground sensors and drones (Glover, 2017). Regarding policies, the creation of tax incentives on exports of surveillance materials in to empower and help the Mexican government in surveillance and curbing illegal immigration. Therefore, the only way to curb illegal migration without affecting the socio-economic relations between the U.S and Mexico is through inclusive negotiations between the governments to ensure that costs are equally shared between the two governments.

References

Borger, J. (2017). The guardian. [Online] Available at: https://www.theguardian.com/world/2017/jan/26/trump-calls-for-20-tax-on-mexican-imports-to-pay-for-border-wall[Accessed April 11, 2017].

Glover, S. (2017). CNN Politics. [Online] Available at: http://edition.cnn.com/2017/01/25/politics/trump-wall-mexico-challenges/[Accessed April 11, 2017].