Challenged to find a way to pay for a wall along the U.S. / Mexico border, the Trump administration is seriously considering renegotiating NAFTA resulting in the possibility of imposing tariffs on imports from Mexico. While the exact goal and outcome is unknown businesses and lawmakers are already lining up to voice their opposition.

On January 26, a Trump Administration spokesman floated the idea of a 20 percent tariff on imports from Mexico due at the time of importation. In reality, existing trade laws afford President Trump the authority to impose tariffs on goods imported from a specific country under certain circumstances; however, the spokesman may have been referring instead to the border adjustment tax that congressional Republican leaders have proposed as part of a broader corporate tax overhaul. This measure would disallow the existing tax deduction for costs associated with imported articles or inputs while exempting export revenue from income tax calculations.

This interpretation appears to be supported by the spokesman’s reference to “using comprehensive tax reform as a means to tax imports from countries that we have a trade deficit [with], like Mexico.” House Ways and Means Committee Chairman Kevin Brady, R-Texas, indicated that this is the way he sees it as well.

While administration officials have spoken of the tariff or border adjustment tax as a way to make Mexico pay for the proposed wall, in either case it would be U.S. importers (and, by extension, U.S. consumers) that would ultimately pay the associated costs. “That’s why”, said Nicole Bivens Collinson, President international trade and government relations for Sandler, Travis & Rosenberg, “it’s important for importers to act now to make sure policymakers in the White House and Congress hear their concerns.” “There’s a lot of uncertainty about the specifics,” she said, “but it seems clear that something is going to change, and likely sooner than later. Input from businesses and trade associations can help influence those decisions.”

STTAS Vice President Mike Wilder said importers should also closely examine their sourcing and determine how their business might be affected by potential changes to tariffs, taxes, or both. “
(Source: Sandler, Travis & Rosenberg Trade Report)