Mexico To End Trade With US? Trump's Border Wall Tax, Trade War Would Have Biggest Effect In Certain States

Among the multitude of ideas President Donald Trump floated since taking office was a 20 percent tax on goods from Mexico in order to pay for the administration’s proposed border wall.

Trump signed an executive order authorizing the construction of a wall between the southern border of the United States and Mexico in January, and pinpointed the tariff as the means to pay for it. The so-called border adjustment tax plan has sparked fears of a trade war with Mexico that could potentially debilitate the overall economy and certain states in particular.

Texas, Arizona, Michigan, New Mexico and Kentucky would be most affected by a trade war with Mexico, according to a study published Tuesday by financial website WalletHub. The study analyzed exports, imports, state GDP and jobs supported by trade among other criteria to discern which of the 50 states would be most impacted by an economic fallout between the U.S. and Mexico.

“In the short run, the owners and employees of firms that export to Mexico [would be most affected by a trade war]. If the Mexican government were to raise barriers against U.S. goods or services, producers of those goods and services would lose profits and/or their jobs very quickly,” Malcolm Fairbrother, a lecturer in global policy and politics in the School of Geographical Sciences at the Cabot Institute-Centre for Multilevel Modelling at the University of Bristol, said in a commentary alongside the study. “In the longer run, consumers – that is to say, everyone in the United States, would lose out, because the things they buy would get more expensive.”

Arizona is the most dependent state on imports from Mexico, receiving almost 39 percent of total U.S. imports from the country. Texas supplies the highest exports to Mexico at almost six percent of the state’s GDP, according to the study.

“Any effort to restrict or impose new barriers on our ability to trade with Mexico and Canada could jeopardize the future of this trade agreement and have serious consequences for Arizona and the country,” Sen. John McCain of Arizona said in January.

In addition, at least six million jobs in the U.S. depend on trade with Mexico, according to BorderCouncil.org. In the wake of Trump’s proposal, economists speculated that Mexico would be severely hurt as well by a frayed economic relationship, suffering a probable recession as a result of rising unemployment and a weakened peso.