20% Wall Tax

[Art VanDelay]

I imagine this will likely get closed down soon but since it was an active discussion in a friend's hangar I'll bring it up here.

The talking heads are all saying the 20% proposed border tax will just get passed on to the American consumers. I'm thinking NOT. If something is 20% more expensive I'm probably just not going to buy it. I might be missing something but I can't think of anything that comes from Mexico that I absolutely need to have.

What say you guys ?

 

[Matthew]

I check the labels on the produce in my grocery store. A lot comes from Mexico, depending on the season.

 

[wayne]

To keep it non-political, I'll not cover whether the wall is a good or bad idea, nor whether an import tax is a good or bad idea.

With a 20% increase there will be some items that would price themselves out of the market. Other items would come in, but it would be largely the US consumers than pay that import tax. Consumers pay for all corporate/import taxes at the-end-of-the-day. Yeah, the bill for it shows up at someone else's mailbox, but the amount gets added into "Cost Of Goods Sold"; in some overhead (taxes) portion of that.

Depending upon the margin of the items being taxed and the competition level, there may be some portion of the tax absorbed by the seller. Generally speaking though the consumer pays the vast majority of it, if not all of it.

That may end up pushing some Mexican products out of a competitive price position. That may be the goal of the Trump administration. Pressure Mexico by hurting their export business to caving in on paying some portion of the cost directly. Or even more broadly to have a more open discussion on immigration.

 

[flyingron]

But with that argument (if I were to believe it), we're gonna come up short on revenue to pay for the wall.

 

[murphey]

I imagine this will likely get closed down soon but since it was an active discussion in a friend's hangar I'll bring it up here.

The talking heads are all saying the 20% proposed border tax will just get passed on to the American consumers. I'm thinking NOT. If something is 20% more expensive I'm probably just not going to buy it. I might be missing something but I can't think of anything that comes from Mexico that I absolutely need to have.

What say you guys ?

Unfortunately there's a lot of fruit & veggies during the winter that comes from Mexico, such as berries (straw, blue, etc), avocados, and so on. As pointed out by some of the car manufacturers, parts are made in Mexico, shipped to the US where the final assembly is done. Now, I wouldn't mind if the Takata air bags are left out at final assembly, but I'd be really upset if other parts aren't available (most is done JIT) hence no cars. No final assembly, the line stops, everyone is out on a stop work order -> no job, no income, no spending money. There is a huge ripple effect that can't be explained or discussed in sound bites or 3 minute segments on the evening news.

If you have opinion on the wall, the tax or anything else, email or fax your congresscritter. The staffs track EVERYTHING from the constituents and report to the talking head in various ways. Some want to see the statistics, others want stats and a sample of the letters, etc.

But whatever you do, do NOT send hard copy letters. Those must go thru USPS security (they're still wary of anthrax) and can be delayed up to a month or 6 weeks. Fax or email.

 

[FormerHangie]

The US and Mexican economies are pretty well integrated. There are all kinds of components that we source from Mexico and vice versa, particularly in the automotive, appliance, and electrical fields.

Then there's that little matter of all the people on both sides of the border who will be thrown out of work when their employers' products are no longer competitive.

It's pretty hard to separate the two economies at this point.

 

[SoCal RV Flyer]

Our second largest source of imported oil comes from Mexico (Canada is No. 1), so the back-and-forth trade is more balanced than you think. Levy the tax and you start a trade war...bad idea IMO.

The wall is largely symbolic. Just as easy to tunnel under a 50-footer as a 20 footer. Isn't there some sort of sonar technology to detect the presence of tunnels and shut them down?

 

[Bill]

With a 20% increase there will be some items that would price themselves out of the market. Other items would come in, but it would be largely the US consumers than pay that import tax. Consumers pay for all corporate/import taxes at the-end-of-the-day. Yeah, the bill for it shows up at someone else's mailbox, but the amount gets added into "Cost Of Goods Sold"; in some overhead (taxes) portion of that.

That may end up pushing some Mexican products out of a competitive price position.

But, at or near +20%, American farms might be able to compete, so maybe an increase in the number of farm workers.

 

[Everskyward]

But, at or near +20%, American farms might be able to compete, so maybe an increase in the number of farm workers.

I think part of the issue is that the growing season in Mexico is longer, being further south.

 

[Ted]

That may end up pushing some Mexican products out of a competitive price position. That may be the goal of the Trump administration. Pressure Mexico by hurting their export business to caving in on paying some portion of the cost directly. Or even more broadly to have a more open discussion on immigration.

I think that's more or less the goal - try to pressure the Mexican government into paying for the wall by pushing their products out of a competitive price position and hurting the economy.

I think the reality of what will happen is that prices will go up and consumption of those items will go down, but not enough to make a huge difference. We really like avocados.

 

[Ted]

I think part of the issue is that the growing season in Mexico is longer, being further south.

Also different climates are better for different kinds of crops. One of my friends is a farmer in Wisconsin. They don't grow avocados.

 

[Anymouse]

Personally, I like the idea of using seized cash and other assets from Mexican (or other) drug cartels to pay for the wall. Seeing how the criminals are the main folks that we're trying to keep out, it makes sense in a way. Another possible revenue source would be from fines levied on illegal immigrants that are deported. Collecting those fines may be problematic though.

 

[Art VanDelay]

Yeah but I can get veggies from Peru and other Central American countries. As for oil what effect will the two new pipelines have ? How well will the Iranians follow OPEC's orders ? I think oil prices are headed lower IMO.

 

[dmspilot]

Economics 101. A tax is shared by the buyer and the seller based on the elasticity of demand and the elasticity of supply. It doesn't matter which party it's levied on, other than the psychological effects.

 

[FlyingElvii]

Looking at the tariff alone it sounds bad.
And It's an easy bet that foodstuffs will be exempted.

In the BIGGER PICTURE, it is something that has to happen. Listen to what the CEO's (You know, the people that actually MAKE THINGS) are telling you. The lowered taxes on manufacturing profits, and MORE IMPORTANTLY, a reduction in the insane REGULATORY costs are going to offset a very large part of the tariff costs, and jump start the American Middle Class again. These same CEO's were trying to tell you WHY all of the manufacturing was leaving in the 90's and 2000's, but it was deemed politically incorrect to listen to them.

As Jack Ma said at Davos last week, China didn't "Steal" our industries, our own government FORCED them out.

 

[JOhnH]

I think part of the issue is that the growing season in Mexico is longer, being further south.

Global warming will take care of that.

 

[FormerHangie]

Looking at the tariff alone it sounds bad.
And It's an easy bet that foodstuffs will be exempted.

In the BIGGER PICTURE, it is something that has to happen. Listen to what the CEO's (You know, the people that actually MAKE THINGS) are telling you. The lowered taxes on manufacturing profits, and MORE IMPORTANTLY, a reduction in the insane REGULATORY costs are going to offset a very large part of the tariff costs, and jump start the American Middle Class again. These same CEO's were trying to tell you WHY all of the manufacturing was leaving in the 90's and 2000's, but it was deemed politically incorrect to listen to them.

As Jack Ma said at Davos last week, China didn't "Steal" our industries, our own government FORCED them out.

If you look at the US per capita GDP, it's been steadily increasing for as long as records have been kept. Yet, for quite a while now, for great majority of Americans, wages have gone nowhere. Do you suppose that maybe something other than trade is involved?

 

[Bill]

If you look at the US per capita GDP, it's been steadily increasing for as long as records have been kept. Yet, for quite a while now, for great majority of Americans, wages have gone nowhere. Do you suppose that maybe something other than trade is involved?

You mean something like this:

 

[Everskyward]

The CEOs are not going to care if the price of their fruits and vegetables are higher, but the lower income people will...

 

[RyanB]

Looking at the tariff alone it sounds bad.
And It's an easy bet that foodstuffs will be exempted.

From what I understand, the tax will cover anything that crosses the border.

Foods, appliances, automotive parts and vehicles, alchohol (dos equis and corona) etc. It would certainly dent the ol' pocketbook harder and consumer spending will likely decrease.

 

[weilke]

But whatever you do, do NOT send hard copy letters. Those must go thru USPS security (they're still wary of anthrax) and can be delayed up to a month or 6 weeks. Fax or email.

The communications director for a senator told me that the way to get attention is a a personal letter with contact information. Copy&paste advocacy emails get very little attention.

 

[FormerHangie]

If we''re concerned about the trade deficit with a country then we should be looking at China, not Mexico.

 

[JOhnH]

Among several reasons that chart is meaningless, one is that it doesn't the number of employees/CEO.
If the CEO of a company with 10 people make 500 times what the average makes, that is one thing. But if there are 5 million employees, that is another thing.

You mean something like this:

 

[JOhnH]

If we''re concerned about the trade deficit with a country then we should be looking at China, not Mexico.

Granted, we should be looking at China, and others.
But the issues isn't solely the trade deficit. If millions of Chinese were sneaking into this country, that would garner some attention too.

 

[FormerHangie]

Granted, we should be looking at China, and others.
But the issues isn't solely the trade deficit. If millions of Chinese were sneaking into this country, that would garner some attention too.

And a tariff would fix that how?

 

[jbarrass]

Economics 101. A tax is shared by the buyer and the seller based on the elasticity of demand and the elasticity of supply. It doesn't matter which party it's levied on, other than the psychological effects.

^^^ This.

But the argument really isn't just macro or about fruits and vegetables. At least in the short run, it's about the oil. Food is perishable so the market will adjust very fast, mostly in favor of the buyer. But oil is fungible so the price won't go up "for us" it will go up for all consumers of oil worldwide. Since our economy produces more oil than we import, it could actually help our economy overall (winners oil companies, losers fuel users) ....or not. There are a lot of moving parts to an economy..

 

[kurttruk]

It is simple. Hit them with 20% and make them think they are going to be forced into it. Then let them talk you down to 4 or 5%. They then think they are getting a deal.

 

[murphey]

Our second largest source of imported oil comes from Mexico (Canada is No. 1), so the back-and-forth trade is more balanced than you think. Levy the tax and you start a trade war...bad idea IMO.

The wall is largely symbolic. Just as easy to tunnel under a 50-footer as a 20 footer. Isn't there some sort of sonar technology to detect the presence of tunnels and shut them down?

How well did the wall work in Berlin?

 

[PaulS]

Bah, Trump is negotiating, it's no where near over yet and will likely never come to a tariff. That said, taxes on corporations get passed to their customers, 100%. There is no room on a balance sheet for any corp to absorb a 20 % tax, if you think they can you have rocks in your head.

 

[murphey]

The communications director for a senator told me that the way to get attention is a a personal letter with contact information. Copy&paste advocacy emails get very little attention.

Fine....send a fax.

 

[Norman]

How well did the wall work in Berlin?

A bit of a difference there. The Berlin Wall as built to keep people from defecting to the west, not to keep people out.

 

[JOhnH]

And a tariff would fix that how?

What is it with the single issues. There are a lot of issues going on between the US and Mexico. There is no single measure that will solve all of them. The tariff is a threat to try to keep American companies from sending jobs to Mexico. But when that happens, Mexicans will be flooding across our borders again to get jobs. So we need the wall.

And there is a real chance the mere threat of the wall and the tariffs will be enough to make some changes in our favor, even if we don't get everything we want.

 

[deonb]

What is it with the single issues. There are a lot of issues going on between the US and Mexico. There is no single measure that will solve all of them. The tariff is a threat to try to keep American companies from sending jobs to Mexico. But when that happens, Mexicans will be flooding across our borders again to get jobs. So we need the wall.

Except then American Airlines will come up with a Super Basic Economy "hang on to the straps" class, and people will fly right over it.

 

[weilke]

How well did the wall work in Berlin?

It worked well for its intended purpose. It also had men with guns authorized to shoot and anti-personnel mines in the outlying areas.

A border patrol officer in TX put it very well: when we built an 18ft wall we ended up with lots of abandoned 19ft ladders.

 

[Matthew]

The CEOs are not going to care if the price of their fruits and vegetables are higher, but the lower income people will...

That depends on the CEO. A CEO of a company that makes frozen pizzas might care very much if the price of tomatoes goes up 20%.

(I know you were hinting more at the CEO personal food budget.)

Cost of material (produce) gets wrapped up in a lot of different things, a lot of different ways.

Most often the cost of food has been affected by fuel prices; how much does it cost to move that food from farm, or laboratory, to table.

 

[paflyer]

It is simple. Hit them with 20% and make them think they are going to be forced into it. Then let them talk you down to 4 or 5%. They then think they are getting a deal.

Negotiation 101. Art of the Deal.

 

[JOhnH]

How well did the wall work in Berlin?

Actually, it worked pretty well for it's intended purpose. Which was to keep people in rather than keep them out. In other words, completely different.

 

[flyingron]

This isatestofabadfewrhj

Also different climates are better for different kinds of crops. One of my friends is a farmer in Wisconsin. They don't grow avocados.

Yep, they grow the in parts of California, Mexico, and Hawaii. You don't see the Hawaiian ones here because of shipping issues. Having diversity allows you to extend the availability around the year and to deal with bad growing years (such as last summer in California).

 

[flyingron]

Negotiation 101. Art of the Deal.

He's not negotiating. In order to do that, he has to listen at some point. But why would the Mexicans even pay $1 for the wall. There's nothing in it for them. Understand, while NAFTA didn't provide a dramatic amount of US export trade, it does provide some. For every gain that some local producer gets in protectionist tariffs, we lose more in exports that the Mexicans counter (either by reciprocating on duties or just not buying from us).

 

[JOhnH]

It is simple. Hit them with 20% and make them think they are going to be forced into it. Then let them talk you down to 4 or 5%. They then think they are getting a deal.

Better yet, threaten them with a 20% tariff, then negotiate more fair trade deals instead. Fair trade good; unfair trade bad.