Regardless of whether wall construction is funded through a discriminatory tariff on imports from Mexico or the border adjustment taxes envisaged in the GOP tax proposal, U.S. consumers and taxpayers will be flipping the bill. The very idea of building the wall in the first place is a disgrace, but demonizing our neighbors and hatching plans that could subvert the Mexican economy and put another Venezuela on our southern border, is belligerent and potentially disastrous.
Hitting all Mexican imports with a 20% tariff is, unfortunately, something the president could do. Under the Constitution, Congress is authorized to regulate foreign commerce, which includes imposing tariffs. But over the years, Congress has delegated some of that authority to the president through various statutes. All of those statutes require that some condition be met (findings of a surge in imports; subsidized imports; unfair foreign practices that hurt U.S. companies; national security crises; public health or safety threats, etc.) before restrictions can be imposed. Sometimes the restrictions are limited in magnitude and duration, sometimes not. Sometimes the actions are subject to judicial review, sometimes not.
By and large, these statutes were passed in conjunction with legislation to implement trade agreements, lower tariffs, or otherwise liberalize trade. They were crafted as safeguards to assuage those concerned that the country’s seemingly inexorable march toward free trade would bring rapid change, which would carry massive adjustment costs and other maladies and threats that the government would be incapable of addressing. The expectation was that the president would use this conditional power sparingly and in the service of greater openness and liberalization. In other words, unlike the Founding Fathers, U.S. Congresses during the 20th century failed to imagine adequately the likes of a Donald Trump as president.
There are a few statutes under which Trump could impose a 20% tariff on all Mexican imports and likely be within the letter of the law. The most probable statute is Section 232(b) of the Trade Expansion Act of 1962, which permits the president to impose duties in the event of a “national emergency.” This statute was invoked once before, by Nixon, in 1971 in response to a balance of payments crisis, involving Japan. Nixon imposed a 10% surcharge on Japanese imports under this law. Trump might claim that the loss of manufacturing jobs or the influx of illegal immigrants from Mexico is a national security crisis that justifies his invocation of this law, and imposition of the tariff. Whether the action would pass muster in a NAFTA panel or at the WTO is another matter. There has never been such a case – duties imposed to redress a national security crisis – brought to dispute settlement.
One thing is all but certain. If Trump acts in this manner, the Mexicans will most certainly retaliate. How all the king’s men don’t see the danger in this tack is what scares me the most.