Friday, May 31, 2019

Trump's Mexico Trade Tariffs Would Damage U.S. and Texas, San Antonio Economist Warns

Posted By on Fri, May 31, 2019 at 5:20 PM

click to enlarge WIKIMEDIA COMMONS / GAGE SKIDMORE
  • Wikimedia Commons / Gage Skidmore
President Trump's threat to slap a 5% tariff on all goods entering from Mexico unless it halts the flow of illegal immigration into the United States is a "crazy" move that would have dire economic consequences for the U.S. and Texas, a local economist cautions.

The White House said it will begin imposing the penalties on June 10 and continue ratcheting them up, eventually topping out at 25% by October. Trump claims he'll stop only once Mexico somehow manages to curb all illegal immigration.

"It's a textbook case of how to inflict self-harm," David MacPherson, head of Trinity University's economics department, said of the economic consequences. And, yes, he'd probably know. He's an actual author of economics textbooks.

If you're not economically inclined, MacPherson also couched Trump's threat in layperson's terms: "It's crazy."



Crazy, of course, because Mexico is the largest U.S. trading partner. Last year, Mexico sent nearly $350 billion in goods north of the border.

Much of the tariffs' costs, MacPherson explained, would be passed directly to U.S. businesses and consumers. What's more, they'd deter investment in businesses reliant on cross-border trade, further weakening the economy.

U.S. automakers and others frequently ship products and components across the border several times during their manufacturing processes, MacPherson points out. The damage to those businesses — many of which operate in Texas because of its proximity to the border — would be profound.

Another risk is that a trade dispute with Mexico could essentially destroy the revisions to the NAFTA trade agreement that Trump was so proud of initiating, the economist added.

And if the tariff threat turns out to be more than a bluff, MacPherson explained, its impact could last well beyond 2020, even if voters decide to cancel Trump's reality-show presidency.

"It takes time for the really bad medicine that's been given to the economy to have its full impact," he said.

Which may explain why politicos from both sides of the aisle have joined a chorus of economic experts calling Trump's move reckless and ill-conceived.

Iowa Sen. Chuck Grassley, a Republican often in lock step with the president, declared his move "a misuse of presidential tariff authority."

Meanwhile Democratic U.S. Rep. Joaquin Castro of San Antonio warned the tariffs would be a "disaster" for Texas.

"Congress cannot allow this President to tank our economy and our relationships with neighbors to further demonize immigrants fleeing violence," he said. "Increasing the costs of goods on Americans will not solve the dire humanitarian situation in Central America."

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