One of President Trump's ideas to “make Mexico pay” for his border wall is imposing a 20% tariff on all US imports from Mexico. In this Insight, we explain the various impacts on US and Mexican firms and households of such a US tariff, and then provide some indicative estimates of these impacts using the GTAP Computable General Equilibrium model.
We show that far from imposing the cost burden on Mexican exporters, US households – and particularly low- to middle-class households – will end up bearing the brunt of these tariffs. Both the US and Mexican economies will suffer. Ironically, the very families that voted for Trump are likely to be most negatively affected. Sad!