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What would a 20% import tax on Mexico mean for consumers?

The cost of a lot of things could go up

Photo (c) Rex Wholster - Fotolia
It still isn't clear just how serious the Trump administration really is about imposing a 20% tax on imports from Mexico, but it's certainly gotten Mexico's attention.

Former Mexican President Vicente Fox was on CNBC's Squawk Box Friday morning to denounce President Trump and the tax idea, in the process opining that American-made cars were "mediocre and overpriced."

After suggesting to reporters on Air Force One that a 20% import tariff is a possible way to pay for Trump's border wall between the two countries, News Secretary Sean Spicer clarified his remarks to say the 20% tax is just a possibility among many that are being considered.

Even so, the prospect of a 20% tax on consumer goods coming into the U.S. from Mexico is something consumers should think about. Because when costs get added to things, it is the consumer who buys them that ultimately bears the extra cost.

Retailers would pass them on

David French of the National Retail Federation tells The New York Times that the extra cost of goods would land on retailers' doorstep. He says they would have no choice but to add them to the retail price that consumers pay.

While French says that prospect "runs counter to the way consumers are feeling" at the moment, it would present an interesting dichotomy. Shoppers might go into a store and see two nearly identical items, one made in Mexico and the other imported from a country that doesn't have to pay a tariff. The price of one could be considerably higher than the other.

Confusion on the car lot?

Or consider a new car dealership. Some of the cars might be made in the U.S. and some might be made in Mexico. Would the manufacturer price the cars from Mexico higher, or would it spread the increase across the entire fleet, making all of its cars more expensive?

Austin TV station KXAN quotes the Texas Association of Business as predicting an import tax would hurt the Texas economy. Beside higher prices for goods, including fresh produce, the organization said it could lead to job losses and a reduction in state tax revenues.

The bottom line is a lot of stuff could get more expensive. Forbes says it isn't complicated. It won't be Mexico that pays for the border wall, it will be you.

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