Trump’s Plans Mean That the Cost of the Wall Could Be Passed on to U.S. Consumers

President Trump pushed back on Thursday against the Mexican President Enrique Peña Nieto’s position that his country will never pay for Trump’s border wall, arguing that Mexico would pay for the wall indirectly through a U.S. tax reform measure.

“We’re working on a tax-reform bill that will reduce our trade deficits, increase American exports and will generate revenue from Mexico that will pay for the wall, if we decide to go that route,” Trump said at a conference of top Republican officials in Philadelphia.

White House spokesman Sean Spicer clarified later to reporters that the tax-reform bill could involve a 20% tax on imports from countries where the U.S. has a deficit.

“By doing it that we can do $10 billion a year and easily pay for the wall just through that mechanism alone,” Spicer said. “That’s really going to provide the funding.”

Relations between the Mexican President and Trump have soured since Trump reiterated a campaign vow that Mexico would pay for his pet project. President Peña Nieto insisted on Wednesday that Mexico would not pay for the wall and announced on Thursday morning that he was canceling a summit meeting with Trump.

Trump has also struggled to explain how Mexico would actually pay, saying on Wednesday in an interview with ABC News that Mexico would pay maybe in a “complicated way, but they will pay.”

Republicans in Congress have supported a tax bill that imposes a border adjusted tax, meaning that imports would be taxed before they entered the U.S.

Many economists argue that a tax on goods entering the U.S. is passed on to American consumers — meaning that they would, in effect, be paying for the wall. According to the Associated Press, some 50% of all nonagricultural goods enter the U.S. duty free, and the U.S. is the No. 1 buyer of Mexican goods. Any damage to the Mexican economy, AP says, would “surely spur more people to risk deportation, jail or even death to somehow cross the border to the U.S. — undercutting Trump’s major goal of stopping illegal immigration.”

If the wall is paid for through a border adjusted tax, Trump would also be backing away from a central promise of his campaign, since the tax is not the same as requiring Mexico to pay directly for the wall.

Trump also committed on Thursday to renegotiating the North American Free Trade Agreement, saying he will “not allow the taxpayers or citizens” to “pay the cost of this defective transaction.”

The President said days after withdrawing from the 12-nation Trans-Pacific Partnership that the U.S. will not make multilateral trade agreements.

“We’ve also withdrawn from the Trans-Pacific Partnership, paving the way for new one-on-one trade deals that protect and defend the American worker and believe me we’re going to have a lot of trade deals,” Trump said. “But they’ll be one-on-one there won’t be a whole big mash pot. They’ll be one-on-one deals.”