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Tax on Mexican Import Could Severely Impact Arizona Economy

Tax on Mexican Import Could Severely Impact Arizona Economy

Nearly 90% of all imports to the U.S. arrive via ship; however, many also arrive directly from our neighbor to the south. Mexico is one of the United States’ largest trading partners, and Arizona’s largest, but that could all change soon.

Since President Trump has been elected, there have been a number of questions regarding how the infamous wall along the U.S.-Mexico border will be paid for. While Trump insists that Mexico will pay for the wall, Mexican officials have been pushing back.

On Wednesday, Jan. 25, Trump signed an executive order to commission the building of the wall. The very next day, serious developments were made when Mexican President Pena Nieto canceled his visit to Washington, and a White House spokesperson proposed that a 20% tax on Mexican imports would pay for the wall.

House Representative Martha McSally, a Republican, has expressed mixed feelings regarding the wall. Though she applauded the executive order to start construction, she believes that the border patrol efforts should be more concrete.

“When it comes to barriers, they are important where appropriate, but only part of the equation,” said McSally. “What we need is a comprehensive strategy to grow situational awareness, build operational control and dismantle the cartels and their networks.”

The growing tensions, as well as the possible tax, have Arizonians on edge. Roughly 100,000 jobs in the state are supported by trade deals with Mexico, and nearly $30 billion worth of imports and exports passed through the state in 2015 alone. Mexican trade is a huge staple of the Arizona economy.

“We [Arizona] export $9.6 billion worth of goods every year to Mexico. We import $7.2 [billion]. So a 20 percent tax on that–you can do the math,” said Robert Medler, Vice President of Government Affairs at the Tucson Metro Chamber. “That’s a lot of money going to the government instead of getting used in our economy here in southern Arizona and throughout Arizona.”

In addition to significant trade, Mexican tourists visit Arizona often, spending about $7.8 million every day, according to the latest data.

Proposing a 20% tax on imports has left many Americans scratching their heads since the tax would affect Americans, not Mexicans.

The tax could perhaps affect grocery store prices most seriously, according to Lance Juyngmeyer, President of the Fresh Produce Association of the Americas.

“We’re responsible for feeding a lot of the United States and Canada, especially during this time of year,” he said.

In Santa Cruz County alone, there are nearly 100 produce warehouses that ship fruits and vegetables all over North America every day. Much of this produce comes from Mexico. With the increased tax rate, both Americans and Canadians could face price hikes at the grocery store.

“[The tax is] going to have some adverse impacts,” said George Hammond, director of the University of Arizona Eller College Economic and Business Research Center. “It may not only reduce our imports, but it may and will likely reduce our exports.”

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