Small Business & Mexico’s 20% Import Tax

Small Business & Mexico’s 20% Import Tax

This week President Trump announced that the US will levy a 20% tax on all imports coming from Mexico; this 20% tax is supposedly to pay for a boarder wall. Will Mexico being paying for the “Wall” or will you the consumer being paying for that wall? More importantly, how will this tax affect Small Businesses? Mexico imports many goods to the US and consumer spending will be impacted thus effecting the economy.

Your’re Right to be Worried!

Mexico is actually the third largest supplier of imports to the United States, according to the Office of the United States Trade Representative (USTR).The top imports from Mexico in 2015 were vehicles, electrical machinery, machinery, mineral fuels, and medical instruments, the USTR reported. But the country is our second largest supplier of agriculture goods, including vegetables, fruit, wine, beer, and snack foods. Mexico not only provides vehicles and produce, but it also sends us computer and phone equipment, appliances like refrigerators and and air conditioners, as CNN Money detailed last year.

But one of the most important things about trade with Mexico, as The Hill reported, is that the United States and Mexico actually has a production sharing system and who knows how that could be affected with this kind of tax. The Woodrow Wilson International Center for Scholars said that 40 percent of the imports coming from Mexico to the U.S. includes materials that were first made in the U.S.

So, think of it like this: The United States produces car parts. Those parts are exported to Mexico, which assembles the parts to make a complete vehicle. Then, those cars are imported back to the United States. The Hill reported that over a five-year period, the United States imported $341 billion of cars and car parts from Mexico. Forty percent of that -$136 billion-was what Mexico had originally bought from the United States to install in cars. So, technically, this tax could be taxing our country’s own products; this will no doubt mean higher prices for goods and services!

Effect on Small Business

Many of the products imported to the US from Mexico are products purchased by small businesses. Car Fleets, produce and office equipment. When small business has to spend more and these products they pass the cost onto you the consumer. Also an underlining factor will be job loses just to keep competitive. Restaurants will see an enormous jump in produce cost making it more expensive to dine out. That Taco Salad Bowl that Trump so fondly cuddled up to will probably cost him 50 to 60% more; but hey he can afford it!

Some of the products detailed in production sharing detailed above are being made by small business contractors; what do you think will happened to those jobs?! No trade deal that was created will have such an impact as the one imposed to “Build that Wall!”

Whether you like it or not, essentially, you’re still paying for the wall on the border of Mexico and the United States…..in more ways than one!

Along with Capitol Business Connection, Bustle contributed to this article.

 

 

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