Economists say Trump administration’s proposed tax hike could have negative economic impact

Thursday the Trump administration announced it’s looking at the possibility of imposing a 20 percent tax on imports from Mexico as part of a tax reform plan but the move is cause for concern especially here on the border.

Some say the hike will negatively impact both U.S. and Mexico’s economy and keep business owners from investing in the border region.

International traders , economists, and El Pasaons said the latest announcement by the Trump administration makes them nervous because Mexico is one of the United States largest trade partners.

“We are working on a tax reform bill that will reduce our trade deficits, increase American exports and will generate revenue from Mexico,” President Donald Trump at a news conference Thursday.

“It makes no sense for the White House to single out one of our most important trading partners and one of our best allies,” said UTEP professor of economics and finance Tom Fullerton.

Fullerton has been paying close attention to the Trump administrations latest proposal.

“This border tax has some really negative downside risks associated with it,” Fullerton said.

At a packed town hall meeting Rep. Beto O’Rourke held -citizens like John Seymour shared their concerns.

“I think it’s not thought out, the implications are not thought out,” Seymour said.

The U.S. imported $303 billion from Mexico in 2015 and 20 percent of that is about $60 billion.

White House press secretary Sean Spicer said it could generate $10 billion a year to pay for the border wall.

“This proposed border task is an import tariff that is large enough it can lead to twin recessions in El Paso and Ciudad Juarez,” Fullerton said.

Fullerton said there are multiple supply chains that link the the U.S economy with the Mexican economy and a 20 percent border tax would cause a disruption leading to displacements in trade.

“Warehouses would go empty on the north side of the border and manufacturing plants would get shuttered south of the border,” Fullerton said.

Fullerton adds the effect would trickle to small business across the border.

“Unemployment would increase in El Paso and it would also increase in Ciudad Juarez,” Fullerton said.

The proposed hike could also affect taxpayers’ wallets.

“If this border tax is implemented and remains in place for an extended period of time, it will result in higher inflation, it will result in higher prices at the consumer level,” Fullerton said.

At a town hall meeting, O’Rourke said the proposed tax hike could make investors think twice before investing money in the region.