President Donald Trump has been detailing his proposal for not only a border wall with the nation of Mexico, however how he plans to pay for such a task, as well.
A report reads that President Trump will think about imposing a 20 percent tariff on Mexican-made products returning into the United States to pay for the border wall. However, economic experts, analysts and Republican congressional members are sharing their disagreement with the idea of a new tariff placed on Mexico.
The 20 percent tariff was one of the other options being considered to respect taxpayer cash, as per the White House press secretary, Sean Spicer. Still, opposition has started to take place, especially concerning the ramifications it might cause for General Motors, Fiat Chrysler Automobiles (FCA) and Ford Motor.
Republican politician Justin Amash of the Michigan congressional delegation stated, “This would be a tax on Americans to pay for the wall. When and how will Mexico repay?” Republican politician Sen. Lindsay Graham likewise repeated that any tariff the United States imposes on Mexico, Mexico can impose on American imports as well.
The fundamental concept of building parts and vehicles in Mexico for U.S. car manufacturers is to benefit from cheaper labor costs. In turn, automakers can sell automobiles at lower rates to American customers, and preferably, sell more vehicles.
General Motors, Ford and FCA haven’t yet discussed the proposed 20 percent tariff, however FCA CEO, Sergio Marchionne, did warn of “monumental consequences” over dismantling the North American Free Trade Agreement (NAFTA) in general.
“The question about repatriation of all of the manufacturing footprint into the United States has got monumental consequences to the market overall,” he stated. “I believe there are consequences that go well-beyond FCA.”
Particularly describing the border tax, Marchionne raised issues over “asymmetrical treatment”.
Ford, however, said a border tax would not harm the company nearly as much as it believes.
“So, it could have a negative impact in terms of them if what we see now as a proposition passes through,” Ford Chief Financial Officer Robert Shanks stated. “And for us it looks pretty appealing actually, not having too much impact at all over the next several years in terms of our money taxes.”
In 2015, imports from Mexico were estimated at $316.4 billion, where as the United States trade deficit has been estimated at $58 billion that same year.
