In the wee hours of Tuesday morning at a rally in Grand Rapids, Michigan, Donald J. Trump trotted out a promise we’ve discussed many times: His promise to inflict a vindictive tariff on all automobiles imported from Mexico. Trump has waffled a bit on this promise, going from 100 percent to 200 percent, at one time even saying 2000 percent. Automobile prices are already at historic levels, and considering nearly 20 percent of all cars sold in the U.S. market originate in Mexico a tariff like this would see either a 20 percent supply shortfall or 20 percent of all cars in the U.S. doubling their MSRP overnight.
“We’re gonna do great things for Michigan. We’re gonna bring the car business blazing back, you’re not gonna remember what it was like. We’re gonna make Detroit greater than it ever was. You know, I’ve been hearing about Detroit for a long time. They’ve been talking about that miracle in Detroit. Well, I mean, look, it hasn’t happened, we gotta be honest. It’s gonna happen now, it’s gonna happen at levels you never dreamt possible.
“So for the auto workers who have been so incredible, you’ve been so incredible, you’re gonna be very happy with the things we’re doing. We killed the plant, as you know, in Mexico, the biggest plant in the world was gonna be built in Mexico and I absolutely killed it.”
During an earlier speech on Monday in North Carolina, Trump announced a 25 percent tariff on everything that isn’t a car crossing the border from Mexico.
“Now we have a new president in Mexico. Supposed to be a very nice woman, I haven’t met her. I’m going to inform her, on day one or sooner, that if they don’t stop this onslaught of criminals and drugs coming into our country, I’m going to immediately impose a 25 percent tariff on everything they send in to the United States of America. You’re the first people I’ve told it to, congratulations North Carolina.”
Remember, Mexico is the now the largest trade partner with the United States. Mexico buys about 16 percent of all U.S. exports, and in turn almost 14 percent of everything we import comes from Mexico. If you’re concerned about inflation now, you should be really scared about what could happen to it if Trump is re-elected.
A tariff isn’t a tax levied against the Mexican government or whatever Trump might think it is. A tariff is a tax for generating revenue to the U.S. government, paid by whoever imports the goods. If Ford is importing components for its U.S.-built cars and trucks from Mexico, the unit price of that piece just went up 25 percent, and they’ll pass that cost on to the end consumer. The same holds true of t-shirts, water bottles, laptops, bananas, and lamps. Everything will increase in price.
All of that is before you consider the impact that Elon Musk would have in gutting Federal spending by $2 trillion. The buying power of all Americans would plummet with massive inflation, and impoverished Americans would see what little safety net they have evaporate.