David Cay Johnston says Donald Trump's plans to hit Mexico with a 20% tariff to pay for a border wall makes no economic sense & Americans will pay

*This article comes from DCReport and is used with permission.

By David Cay Johnston*

Donald Trump’s plan to slap Mexican imports with a 20% tariff - and then to use that money to pay for his border wall - makes no economic sense at all. The worst part? Americans will be paying for it with higher prices on food and manufactured goods. Americans, not Mexicans, will pay for the wall. 

Trump’s plan to finance his wall with Mexico shows that while he has a bachelor’s degree in economics from an Ivy League school he knows nothing about the subject. 

The White House said Trump wants to slap a 20 percent tariff on goods imported from Mexico - car parts, fresh winter tomatoes and oil - to pay for the wall. 

That means Americans, not Mexicans, will pay for the wall. 

A tariff is a form of tax that raises prices. So tomatoes that cost $1 would rise to $1.20 to cover the tariff. 

Sales of Mexican tomatoes might dip a bit because the tariff would make them too costly for some consumers. Gasoline prices would go up, too, because Mexico sells some of its oil to America. 

But the economic burden of the tariff would fall almost entirely on Americans in the form of higher prices. Popular dislike for tariffs was a major reason the individual income tax was adopted a century ago. 

From June 2015, when Trump announced his campaign, he would not explain how he would force Mexico, a sovereign nation, to pay for his wall. After winning the Electoral College, Trump said Americans would front the cost and recoup it later from Mexico, again without explaining how. 

The reality is that Trump does not understand economics and, especially, government finance. 

He studied real estate at Penn for two years. By his own account he was gone often, doing real estate deals with his father in New York and as far away as Cincinnati. 

“I’m really, really smart,” Trump says, claiming he attended the “super genius” Wharton School, a graduate business school at Penn renowned for its focus on finance. But Trump never attended that graduate school.

That Trump doesn’t know basics every Wharton graduate student learns became clear in lawsuit testimony a decade ago. He said he did not understand accounting. Asked about NPV, or net present value, a basic tool for evaluating whether to make an investment, Trump testified: 

“The concept of net present value to me would be the value of the land currently after debt. Well, to me, the word ‘net’ is an interesting word. It’s really - the word ‘value’ is the important word. If you have an asset that you can do other things with but you don’t choose to do them - I haven’t chosen to do that.” 

Like his plan to make Mexico pay for his wall, that’s gibberish. 

Trump is not alone among his team in ignorance of basic facts. Sean Spicer, Trump’s press secretary, said on Jan. 26 “right now our country’s policy is to tax exports…” 

Taxes on exports are prohibited by our Constitution. Article I, Section 9, states “No Tax or Duty shall be laid on Articles exported from any State.”

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*David Cay Johnston is a Pulitzer Prize winning US investigative journalist. He featured in this interest.co.nz video interview last year.

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57 Comments

No one likes walls this morning?

Perhaps Trump is being incredibly clever. He has called Mexico out for the corrupt Oligarchy it really is. Maybe he is saying no more gangs, drugs, thugs etc, I'm calling you , clean up your act or I will build a wall and without us you will be exposed for what you are and your people will react.
So Mexico balls in your court, what ya going to do now?

If you are looking for corrupt oligarchies,how about Russia? Lots of gangs,drugs and lots of thugs,right from the top down.

So, um, http://www.reuters.com/article/us-usa-trump-extremists-program-exclusiv-...
This is going to end very, very badly, hopefully just for Trump

Perhaps the Mexicans should take the same tactic as the Dutch and shame him in to realizing that what he's doing is just plain wrong!

http://www.huffingtonpost.com/entry/donald-trump-netherlands-spoof-touri...

He's too thick for that.
It's catching on http://www.bbc.com/news/world-europe-38853399

They are scared.
They are afraid of a strong USA.
But when push comes to shove, who will they run to?

The way it is shaping up, almost anyone else in the world

I think we all need to have a look at this and a little think http://www.mayoclinic.org/diseases-conditions/narcissistic-personality-d...

Yes that Trump to a 'T'!

Yes, and bloody scary it is and should be

he is the most powerful man in the world so we shouldn't denigrate him. I actually think that if they had another election he would get even more support.
The recent history of the States has been to advantage the few at the cost of many. The bailout of Wall street was the final straw, immigrants pouring over the boarder to be used by corporations as cheap labour needed to be dealt with years ago.
Trump has huge support especially now many are seeing him as a man of action, the majority are silent but the vocal minority are going to be on the ropes for a while. The majority are going to force a revolution in the USA and they are going to do it at the ballot box.

Andrew, did you read that definition of an extreme narcissist or not, the problem is, Trump IS one, and being that, is extraordinarily dangerous. I am stunned that people cannot see this. The US is in deep do-do's with him at the helm. Whatever problems there are , Trump is absolutely not the solution.

The choice was between Clinton and Trump, you could say they chose the lesser evil. The deep do do has been about for a long time, no one had the courage to do what was needed lets wait a while before we judge.

Are you trying to tell me that what Trump is doing, is what was needed, are you, seriously?

I'm saying they are a democracy and thats what the majority voted for. The policies of the past excluded too many people. The working class in the USA has had literally no wage increase for 16 years.
You cannot just ignore the suffering of a large portion of your country without consequences. It's all very well for overpaid movie stars, sportsman and internet stars to criticise but they have not walked in others shoes, large parts of the USA have been hollowed out and there are tent cities and poverty to see all around.
You might not like rule of the majority but you are going to have to get used to it because coming up is a lot more of the same La Penn in France and five star in Italy for a start. Politicians who think they can make policies that disadvantage large portions of the economy are learning a lesson.
Don't forget the US army is mostly from the mid-west, it's an Olivers army and they are a force to be reckoned with.
https://www.youtube.com/watch?v=Yhkwj85VzcE

All of that may be true, to think Trump is the saviour is staggering, he is part of the bloody problem and used those "massses" you spoke of to his own advantage, to glorify himself, it will end in a huge mess. And Trump's approval rating below 50% kind of suggests the majority do not support him, really. It was his ilk that put them where they are! Where does he source all his own manufacturing. He is a charlatan. What a shame. He is NOT what the majority voted for, please remember.

You don't know Trump any better than me, how do you know him, from what you read and hear in the media? Give me a break. The real failure is the Democrats, they are on the ropes, and either change or become irrelevant. In the USA the masses have spoken I wouldn't ignore them and I wouldn't trivialise them, I have smart friends, lawyers and business men, policemen, doctors and army officers, who all voted for Trump, you don't hollow out a country, bring in policy deeply offensive to Christian values, insult peoples morals and get away with it any more.

Two of my children went to high school in California. A liberal area but still %85 of children were from a christian background. They Prayed the prayer of allegiance every morning. The did a ton of US history. They said the respect was amazing, boys opened doors for girls they called the teachers sir and Madam, everyone was career focused, well dressed and courteous.
One is now finishing school in the UK. She tells me that the attitude stinks in the UK, children are rude and disrespectful. Teachers get talked over and lots of children don't even turn up to class.
Every party she goes to the parents supply alcohol and there are problems, kids are drunk lots, no parent in California is ever going to supply booze to a minor, you want to try that get used to bars.

I ask her where she would rather live and she tells me California by a mile, the generosity and the compassion of the people is in a different world, no child goes without at the USA school because parents make sure other children have the right and good sports equipment and give a lot of time and money to the school.

The UK lives in Poverty by comparison.

How interesting for your daughter to get those two experiences - she sounds really grounded.

What amazes me in reading the media coverage of the protests and the opinion polls and the giving of a general impression that the place is going to hell in a hand basket under Trump .. is that if impeached (as seems to be the intent of the backlash) Mike Pence, I assume, would become president? Point is - he's got a real track record as a politician and it ain't middle of the road by any means. Interesting too that he supported fast tracking of the TPP back in 2014;
https://twitter.com/govpencein/status/509032682555457536

And he is in an opposite camp to Trump (and Trump is in opposition to most of the GOP and Wall Street) where Glass-Steagall is concerned;
https://hill.house.gov/media-center/in-the-news/gop-lawmakers-blindsided...

How Trump progresses that matter is the one I'm really looking forward to - how Wall Street gets dealt to will be the real measure of whether or not he is true to his 'man of main street' campaign rhetoric. He might need to make peace with Elizabeth Warren :-).

Nothing lasts forever but I don't think Trump is the US Ozymandius.

https://www.youtube.com/watch?v=sPlSH6n37ts

Not sure what your point is but a liberal state such as California is not pro Trump at all: 2016 election: Clinton 61.5% Trump 31.5% Independents 7%. The so called snowflakes and "libtards" there are unsurprisingly perhaps more likely to be respectful of others.

Andrewj,

Interesting post. You know more about the school system in California than I do,but is it not the case that Proposition 13-limiting property taxes to 1% of assessed value-led to the tremendous decline of the state's public school system? The same happened to the publicly funded Uni of California. Its budget was cut by $1bn,almost 25% in just 4 years to 2012,while at the same time,Stanford raised $6bn. Does this not signify the growing divide between the haves and have nots,even in California?
I read widely on economic matters and I think I can,at least to some extent,understand what drove millions of Americans to support Trump.I had,like many others,underestimated just how much Clinton was disliked and distrusted. However,I think that Trump will disappoint his supporters and could well be dangerous to global stability. I believe him to be psychologically unstable.

Yes agree with Pocket deep do-do's indeed! What's even more scary is this that Trump has access to nuclear weapons when we all know that he's a hot head and not a rational man.

Thats just peddling fear, there is no indication that Trump is a president who wants to go war, anyway which country do you think he wants to Nuke, even North Korea is really a problem for China rather than the US.
There are multiple safeguards regarding Nukes and they would be used well after conventional weapons failed.
The problems and the shakedown are going to happen internally.

Iran

Iran is a Shite country it took over southern Iraq as it is also Shite. They are not fanatical like Sunni especially the Wahhabi followers out of Saudi. Most of the 9/11 terrorists were out of Saudi and what did the USA do? it attacked Iraq.
Remember the Iraq Iran war and all those young children taken to the front as cannon fodder? Israel with it's 200 Nukes can take care of Iran in an afternoon. Thats the trouble in the middle east, Hamas is funded via Iran/Syria and seen as an enemy of Israel so must come down, Israel tries to influence the USA to do the job for it.
Hamas stopped all the bus bombings in Israel as Iran wasn't impressed. Hamas soldiers are doing a very good job in Syria, taking down people with a grudge against the west and almost anyone else who isn't Muslim.
Russia is seen as an enemy ,it's GDP is smaller than New Yorks, it's military spending is only 3 weeks of the USA's. It doesn't have pork barrel politics influencing military spending, which in the USA is turning into a disaster.

http://thehill.com/policy/defense/317864-trump-makes-right-turn-on-iran

You write like nuclear weapons are a big nothing, any nuclear conflict on the planet will affect ALL of the planet.

I don't think anyone here noticed Nagasaki . Nukes are historical result of the Cold war and the hawks in the Reagan error, paranoia about the USSR trying to take over the world, when in reality they couldn't even feed themselves. The treat of the USSR evaporated into nothing. I don't see any problem for the West except in Pakistan and Nth Korea and I think they are other people problems. Most battles will be fought with advanced traditional warfare as the USA is way too advanced in its capabilities for a full frontal attack by anyone.

If my memory serves, the weapons used on Japan were atom bombs, not nuclear ones.

What I am meaning to point out is most of the USA's problems are internal and it's where people expect Trump to be most proactive. I for one am not worried about Nukes.

The ills in the USA are not confined to them alone, and they have no more right to economic well being than any other country. The problem of today, everywhere is inequality, but we know how the USA views that. And just one other thing, next time you refer to the "left' make sure the people you are referring to are the people whose politics are left, that is people like Bernie Sanders and Elizabeth Warren. The USA has never been anywhere near left in its entire existence, with maybe FDR dipping his toes in the water being an exception, and they way it has set itself up, it will be difficult for it to do so. Perhaps the people in California calling for a Calexit are onto something, after all the USA is no less a bunch of mini countries in an alliance, and possibly the actual epitome of what all the people so critical of Europe are about. You end up in situations where the minority have rule over the majority, and in one country (state) is liberal and another not so much, maybe they need to go their own ways. Just a thought, just another perspective.

It looks more and more like the biggest terrorist in the US history was Greenspan and his theory that you could keep the good times rolling forever. The damage done to live and limb is shocking.

Trump seems to have done okay out of it all

Greenspan - yes

Trouble is his passing of the baton to his two successors, who are both of the brotherhood

Trumps view on Russia is that of a rational man CJ. Compare his view to those crazies who up to 20th January had the nuclear button. Obama himself and those who worked for him just had to demonise Russia. There is always some excuse you can find, and they were going down the road of confrontation about matters irrelevant to the USA (eg Ukraine border) and personal attacks on Putin. It seemed the USA just had to have some bogey it wants to war with.
Pre Trump the chances of a nuclear war with Russia was much higher.

You gotta laugh, clearly Thiel bought his prepper's bolt hole here in NZ so he could have a safe haven from the Obama administration. Would I be the only one thinking that he might need it now more than ever, now his buddy, Trump, is at the helm?

This didn't end up being good publicity for New Zealand - the question arising in the USA is 'how much does a NZ passport cost". https://www.nytimes.com/2017/02/01/business/peter-thiel-new-zealand-citi...

(and the people involved in approving this exceptional citizenship application seemingly can't remember any details.)

He gives 1 million to Christchurch Earthquake appeal, Taxpayers pay him 7 million for the privilege. (Fair exchange is no Robbery....as the saying goes)...What?.

No accounting for 'common sense' is there.
Actually borders on insanity, this cross border well wishing Government.

In fact why have to pay for Passports at all, for citizens if almost any one can buy their way in....using taxpayers money. One could be said to offset the other.

I see some conflicts here, with the Mental Health issues of our Government Departments, who clearly cannot remember, what they do from one year to the next.

I suggest we do not employ people without an Excellent memory as I seem to think this may be a corrupt practice, a bit like Romania.....only just a teeny weeny bit corrupted memory is OK....so a get out of Jail Free Card, is invoked.

I know a mere million is not much to some people....but it smacks of hypocrisy when this sort of things happen, with the Sure knowledge of so many, many (honest)?...people.

Wall Street is one giant fraud as it is. If the Dodd Frank Act is repealed they set up something large and worse than the subprime crisis. American exceptionalism.

Markets in general are like a casino.
The people running it aren't doing it for nothing.
But. You Pay to play.
And when you get ahead by a decent margin. You bail out.

I think I heard Warrne Buffet say something like that.

Just on that last point in the article: Donald Trump's directive that female staff should ‘dress like women’ causes another social media backlash.

Thankfully there are those that have some guts out there! BBC article: I'll dress like a woman when you act like a president, police officer tells Trump
http://www.bbc.com/news/world-us-canada-38853350

more nonsense designed to keep focus off the real issues.
What garbage from the BBC where are all the real reporters and the real stories? Shows that those that own the media think they can treat us all like idiots.

Why is it that some people think that the media should only report stories they want to hear? Only news twisted to their world view? You can get purely partisan 'news' from social media echo chambers. Expect verified reporting to cover both sides of an issue. But don't expect them to just report in a way that confirms a bias. I think religious echo chambers are the basis of all this self-righteous angst (on both sides). Fundamentalism fuels fear they cannot control the messages of certainty they push (no matter what religion).

The BBC and other major news outlets don't treat people like 'idiots' at all. They just don't cater to 'idiots'. 'Idiots' don't like verified, multiple-sourced, balanced news.

(But I do agree that some media are chasing click-bait and have slipped badly. The Daily Mail strategy has infected many media outlets in their drive for advertising from clicks. But there are still many major channels that are holding the line. You can kind of tell on TV. Those that pay to be on the local platforms like RT etc are the propagandists. Those the platforms have to pay to include in their programming are the proper news channels. It's not as easy to distinguish online, but critical thinking helps a lot.)

What I like to do before I "absorb" anything is have a look at various sites, and try to find what I consider to be fairly neutral sources, as best as that can be, maybe respected is a better way to describe them. I will check a few out before I make my mind up about something. There are some things I don't bother with at all, like the dress code thing, but more often than not, even though you can sort through the click bait headlines to something less sensational, there is always something to give substance to particular concerns about the guy.
Most of my view of Trump is observational.

The BBC swallowed hook and line the Weapons of Mass destruction bull, they then supported the invasion of bloody near any country, with anything like half a brain in the middle east being blown to bits for what, stability?
Gaddafi said that Libya was the cork in North Africa

"Tomorrow Europe might no longer be European, and even black, as there are millions who want to come in," said Col Gaddafi, quoted by the AFP news agency

"We don't know what will happen, what will be the reaction of the white and Christian Europeans faced with this influx of starving and ignorant Africans," Col Gaddafi said.

"We don't know if Europe will remain an advanced and united continent or if it will be destroyed, as happened with the barbarian invasions."

here is a better article but not in the BBC.

https://sputniknews.com/world/201509171027135147-gaddafi-libya-refugees-...

I think Europe is becoming a mess and it is historically a savage continent. The backlash will be because our leaders forgot their history.

Andrew you are not stupid, but........I've been following all of Trumps tweets for several weeks now. He doesn't need any spin from the MSM to be painted as an idiot, he is capable on his own of projecting the image of the biggest dickhead. The guy is deranged, he is up late every night tweeting crap about one perceived slight then another. If is not Arnie one minute its Turnball the next, it goes on and on. The guy needs to get more "Presidential", its as if he thinks he is hosting another reality TV show again.

The BBC is now acknowledged widely as having left-wing, pro-globalisation, Remain bias, pro-Hamas bias, and has long lost its historic objective journalistic voice.
https://biasedbbc.org
https://bbcwatch.org
https://en.m.wikipedia.org/wiki/Criticism_of_the_BBC

Many of the 'stories' on Trump are really just superficial gossip magazine type 'coverage'.
There is no analysis of how conservative supporters are observing the govt actions.
Whatever your political worldview, the media simply refuses to objectively report. They are caught up in a frenzy of denial and protest action.

He still represents the biggest democracy in the world and the wealthiest country by a mile. So why denigrate him, what have we to gain? I would think a wise man would treat him with respect and be courteous.
They are putting the USA up as a bunch of fools for us all to laugh at, but I know from experience that there are many very clever people in power in the USA, and they are very capable but they sat by while Clinton and Obama made a hash of Libya, while The CIA funded rebels in Syria and tried to destabilise any government where they imagined a threat to exist or they saw them affecting income stream for private companies.

https://www.youtube.com/watch?v=FmIRYvJQeHM
History is going to repeat in the middle east. Europe will rise up against it's governments unless they stop immigration and crime and deal with unemployment. The EU is a bureaucratic nightmare as seen through the eyes of the majority of people.
The world is going to turn as our leaders one after the other fail us in to quagmire of regional disputes with no resolution. It's Rome all over again with many more people all 'connected' one way or the other via social media.
http://www.independent.co.uk/voices/editorials/we-need-an-honest-assessm...

AJ... this video is worth watching... Its mostly about Trumps position on energy and climate change...but it touches on a class of people that the guy labels as...."the experteria"...
These are the socalled "experts" that are wanting to run our lives...
His view is that middle america has had a guts full of the "experteria".... and Trump being elected President was to do with that... somewhat

I tend to agree....

To be fair I think most of us knew a while back that Americans would end up paying for their own wall one way or another.

Silly isn't it. :)

'Exclusive - Trump border 'wall' to cost $21.6 billion, take 3.5 years to build: internal report' - http://www.reuters.com/article/us-usa-trump-immigration-wall-exclusive-idUSKBN15O2ZN