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Mexico vs. Trump - Let the Tariffs Begin!

Thu, Jan 26, 2017 - 3:00pm

This morning, President Trump tweeted, “The U.S. has a 60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers…of jobs and companies lost. If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting.”

News broke today, according to the Wall Street Journal, that the Mexican president officially canceled the meeting with President Trump.

The biggest question facing Trump’s proposed wall, blockade, barrier, or whatever you want to call it, is funding: who is going to pay or it?

It isn’t clear how much the wall would cost. Many Republicans and Democrats are hesitant to offer their full-fledged support without knowing the real price tag. Senate Majority Leader Mitch McConnell has surmised that the wall could cost anywhere from $12 to $15 billion dollars, according to Business Insider, but knowing Washington, the wall could quite easily cost 5 times that.

Cost overruns are probably not the biggest concern for those near the border, however. In addition to the handful of executive orders President Trump has signed during his first week in office, Trump has informed the American people that a large part of his policy on immigration will finally necessitate sanctuary cities to comply with federal law.

According to a recent poll conducted by UC Berkeley, some 74% of California voters support ending sanctuary cities. In the same poll, some 65% of Hispanics in California also do not support the existence of sanctuary cities. Typically, the media is quick to condemn and abuse supporters of immigration reform on moral grounds. Perhaps citizens are finally realizing that the media is putting the interests of illegal immigrants over the interests of average American citizens.

If Trump is going to follow through on his commitment to build a wall with Mexico, yet Mexico is unwilling to pay for it directly, this may be the first country where trade tariffs become the new normal of political weaponry.

Today, the White House Press Secretary Sean Spicer told news reporters, “the plan that is taking shape now (is) using comprehensive tax reform as a means to tax imports from countries that we have a trade deficit from, like Mexico…which is, by the way, a practice that 160 other countries do right now. Our country’s policy is to tax exports and let imports float freely in, which is ridiculous, but by doing it that way we can do $10 billion a year and easily pay for the wall just through that mechanism alone.” 

Given the timing of this statement with the cancellation of the meeting between President Trump and President Pena, it’s no coincidence that the Trump administration has officially announced this proposition just hours after that fact.

The implications of a tariff war may be uncertain at the moment, but its impact will presumably stretch much further than just the country of Mexico.

While the Trump team marches on, sit down, strap in, and buckle up because the United States and global economy are on course for an interesting ride.

About the Author

Associate Wealth Manager
josh [dot] nunn [at] financialsense [dot] com ()
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