Could tax on Mexican imports hurt consumers in the United States?

Posted at 1:00 AM, Jan 27, 2017
and last updated 2017-01-27 01:00:39-05

CINCINNATI -- President Donald Trump’s proposed tariff on goods imported from Mexico could be the start of an interesting but dangerous financial experiment, according to a retired economics professor.

George Vredeveld, who taught economics at the University of Cincinnati until his retirement, said that the proposed tax -- one meant to fund Trump’s $12-$15 billion wall on the United States’ southern border -- might end up passing the extra cost of importing on to American consumers.

"To have a blanket 20-percent tariff on goods that are imported from Mexico could very well not be in the best interest of Americans," he said. "(Mexico is) one of our greatest trading partners."

Rony Perez, a grocery store owner, relies on that partnership. He estimated Thursday night that around one fifth of the goods in his store came from Mexico, and he said other, larger grocery stores, such as Kroger and Walmart, would likely come up with a similar figure.

Most of his Mexican-made goods were fruits and vegetables -- tomatoes, peppers, bananas and avocados -- but other businesses import larger and far more costly Mexican products. Automobile manufacturers like Ford and Mercedes-Benz, for example, produce some of their vehicles on the other side of the border.

"Customers will end up paying the taxes," Perez said. 

He added that he worried companies would raise the prices of their products to compensate for the economic burden of the tariff.

"It’s going to affect the American people," he said. "They’re the ones that consume the products, they’re the ones that use the products, and they’re the ones that are going to pay."

The White House backed down from its initial 20 percent tax estimate Thursday, and press secretary Sean Spicer added that the president was considering a variety of options to fund the proposed wall. George Vredeveld and Rony Perez only hope that the final decision will not hurt consumers in the United States.

"The greatest danger is a trade war," Vredeveld said. "We don’t want to see this."