AUSTIN — Texas lawmakers are warning of the damage President Trump's proposal for a 20% tax on imports from Mexico would do to the Lone Star State.
On Thursday, Trump spokesman Sean Spicer said the president would make Mexico pay for a border wall through the tax. Trump’s aides later walked that back a bit, saying the tax was just an option. But it caused deep alarm among economists, business leaders and some elected officials on both sides of the aisle.
“It’s going to hurt U.S. industrial performance rather than help it,” said Tom Fullerton, an economist at the University of Texas at El Paso. “It’s going to increase unemployment rather than reduce it.”
Fullerton explained that most cross-border trade is between companies that often ship products back and forth multiple times, adding value each step of the way. Imposing a 20% hit on each northward step would cause severe economic dislocation, shuttering businesses on both sides of the border, he said.
“It threatens to disrupt intricate supply chains that link the two economies together,” Fullerton said.
The Texas economy, already struggling because of low energy prices, is highly dependent on trade with Mexico. According to Census Bureau figures, 33% of U.S. imports from Mexico flow through Texas, and 37% of U.S. exports to Mexico come from the Lone Star State.
Unlike the nation as a whole, Texas has a trade surplus with with Mexico. In 2015, it sent $92 billion worth of goods across the border while importing $84 billion, the Census Bureau reported.
The idea of levying a 20% import tax to pay for the border wall was floated a day after Trump signed an executive order to build the wall, while continuing to insist he’d make Mexico pay for it.
U.S. Rep. Will Hurd, R-Texas, criticized both the wall plan, and the import tax idea.
“Building a wall is the most expensive and least effective way to secure the border, so as a conservative, I don't believe it is something that anyone should pay for,” Hurd, whose district spans 800 miles of the border, said in an email to the El Paso Times.
“Further, this tariff would be devastating to the communities in my district that rely on border trade, harmful to the thousands of U.S. companies that work hand-in-hand with Mexican companies to produce goods and services, and expensive to the millions of middle-class families who will feel the pinch as prices go up.”
The Texas Association of Business, a trade organization, on Thursday evening said a border tax would harm the Texas economy.
“Texas’ number one trading partner by far is Mexico, and imposing a 20% tax on Mexican imports to fund a border wall would hurt the Texas economy," Association President Chris Wallace said in a statement. "This proposal could mean a loss of jobs and a hit to state tax revenues.”
El Paso County Judge Veronica Escobar said she’s already seeing harm from a depressed Mexican peso firsthand. It has sapped the buying power of residents of neighboring Juárez, who frequently cross into El Paso to buy U.S. consumer goods, she said.
A 20% import tax would only further depress the peso — along with economies on both sides of the border, she said.
“There will be dire economic consequences to this,” she said. “They won’t only be felt in El Paso; they’ll be felt throughout the country.”
“It will hurt everyone,” he said. “It is a bad idea. I have heard reports that Trump is stepping back (from imposing a 20% tariff), but the suggestion ... will make it harder for El Paso and Juárez to attract investments, capital and talent. It is going to be terrible.”
At least one Texas GOP leader was in favor of a version of increased taxes on imports.
In a Thursday afternoon appearance on Fox News, U.S. Rep. Kevin Brady said he supports a 20% increase on imports from around the world and using the money to slash business taxes. Brady, chairman of the House Ways and Means Committee, said it would level the playing field with other countries that he said already tax imports.
“We have to go bold because our competitors have already gone bold,” Brady said.
Other Texas Republicans were more circumspect about the possibility of taxing the imports.
The staff of Texas Sen. John Cornyn, the No. 2 Republican in the Senate, pointed to a tweet Cornyn put out.
“Many unanswered questions about proposed ‘border adjustment’ tax,” it said.