Analysis by Kyle A. Lohmeier
After proving earlier this week that he doesn’t even begin to comprehend the geopolitical situation in Syria, yesterday President Donald Trump revealed his full-scale ignorance of basic economics and international trade by suggesting the imposition of a 20% tariff on goods made in Mexico to finance the construction of a wall between the two countries. Since 2015, his pledge to “build a wall and make Mexico pay for it” formed the centerpiece of the campaign rhetoric that helped get him elected president; almost as much as his quality of not being Hillary Clinton did.
By just breathing such idiocy aloud, Trump sent Mexico’s peso tumbling even further south and prompted Mexican President Enrique Pena Nieto to cancel a working meeting with Trump scheduled for next week. Dumber still, as Steve Holland and Miguel Gutierrez pointed out in their piece for Reuters, the 20% tax wouldn’t ultimately even be paid by the Mexican government as Mexico isn’t a communist hell hole and therefore doesn’t own the many companies that export all manner of things, from flat-screen TVs to avocadoes to near-flavorless beer into the USA.
In fact, there’s a reason Fender makes two different grades of their Standard Stratocaster electric guitar, the Standard, and American Standard, the former is made in Mexico (often called MIM Strats for that reason) and the latter is made in the USA. By the time they’re hanging side-by-side at your local ax shop the MIM Strat is wearing a price tag about $600 less than its made-in-America cousin. By all accounts MIM Strats are almost-as-good as MIA ones and a lot more affordable – prefect for newer players who want a piece of that iconic Strat look and sound without laying out well over $1,000 to get it. So, if Trump follows through with this plan to both “punish” Mexico and make it “pay” for the wall; he’ll merely end up punishing the Fender Musical Instruments Corporation and the guitarists who will have to look down the range toward Chinese-made Squire Stratocasters (which no one considers almost-as-good as an American Standard) if they’re determined to own a Strat of some sort and aren’t independently wealthy. How boosting sales of Chinese-made guitars will magically make money appear in Washington D.C. to finance an unnecessary border wall has not been explained to me.
The plan makes so little actual sense that Trump’s comments about it at a Republican retreat in Philadelphia did nothing to explain it.
‘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,’” Reuters quoted him as saying.
According to that same article, the United States is currently running a $58.8 billion trade deficit with Mexico – meaning that U.S. companies and consumers buy $58.8 billion more worth of goods and services from Mexican companies than Mexican consumers and companies buy from American companies. By way of comparison, Mexico’s population is less than half of the United States’ and their Gross Domestic Product as about fifteen times smaller than that of the USA – so there are fewer people in Mexico and they have less disposable income available to buy American goods than vice versa. That our economy is far stronger, allows consumers more spending money for imported goods, be they avocadoes or Stratocasters. In other words, the trade deficit with Mexico is a bit of a red herring; it by itself isn’t a terribly important fact. Furthermore, regulations and taxes in the United States are the reasons why companies from Ford to Fender send manufacturing jobs to Mexico, where taxes and regulations are more lax and it is therefore less expensive to run a business. I suppose then, that his plan is to use taxation to make doing business with the USA from a subsidiary in Mexico as financially unsustainable as doing the same business in the USA is to begin with. How this will increase American exports is beyond me.
First of all, we don’t make much here anymore to export; I don’t foresee Mexicans suddenly buying up a bunch of American Standard Strats. We also don’t grow much of the sort of produce we typically import from Mexico here in the United States. If the Big Three were to bring manufacturing jobs back from Mexico, they’d end up going back to UAW-represented plants and therefore the end cost of the vehicles built would be too high to be competitive against other vehicles in the same market segment. There is literally no imaginable connection between jacking up tariffs on Mexican imports and increasing American exports. None.
And, here we come to the crux of the problem: We have as president a barely-competent businessman who somehow doesn’t seem to understand the fundamental problem of wanting to have his cake and eat it too. He wants punitive taxation, he threatens protectionism and yet wants to create jobs and improve the lot of the average American. Trying to improve the financial well-being of Americans while taxing those who produce the goods they want to buy, therefore making said goods more expensive to the American consumer, makes as much sense as trying to cure syphilis with herpes.
In fact, the only good thing about Trump’s proposal is that it adds yet more weight to the arguments that I and other anarchists make – that having a government is a net-loss and all humans would be better off without one.
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