When Trump-onomics Comes into Contact with the Real World

 

made_in_chinaLife is complicated. There are trade-offs. And unintended consequences — good, bad, neutral.

Example: Take Donald Trump’s idea of banning remittances unless Mexico pays for his proposed border wall. From a NY Times op-ed:

There are a number of logistical problems with this plan, including political realities, legality and the feasibility of stemming the flow of these informal payments. But even assuming this policy was possible, the economic implications would be felt as much in the United States as in Mexico.

While my research suggests that Mexican immigrants in the United States may initially have more disposable income if they could not send money, their families back home would be less likely to invest in education, start businesses, and get out of poverty. This could damage Mexico’s economy: Mexico receives $24.4 billion in remittances from immigrants in the United States, which accounts for about 2 percent of Mexico’s gross domestic product. Indeed, withholding this money may actually encourage immigration to the United States.

Banning remittances could also reduce incentives for the best and brightest immigrants to come to the United States. Without the opportunity to provide for their family and friends back home, many talented immigrants might choose to move elsewhere. Or migrants may choose instead to bring their families with them to the United States, undermining the objectives of Mr. Trump’s proposal and straining social services.

And what about a Trump tariff on Chinese goods coming to America?

From another NY Times piece:

Shrinking sales of Chinese products would generally hurt American businesses and workers. A product labeled “Made in China” is not necessarily 100 percent Chinese, since many goods are assembled in China with parts from the United States and elsewhere. Sluggish purchases of these so-called Chinese products would reduce the sales of their American components, too.

For this reason and others, quite a lot of the money spent on Chinese goods actually ends up in the wallets of Americans. A study by the Federal Reserve Bank of San Francisco figured that 55 cents of every $1 spent by an American shopper on a “Made in China” product goes to the Americans selling, transporting and marketing that product. Suppressing Chinese imports would harm shopkeepers and truck drivers. …

It seems likely that such a tariff would burden American consumers while doing little to create jobs for them. Gary Clyde Hufbauer and Sean Lowry at the Peterson Institute for International Economics, studying the impact of a 35 percent tariff imposed on Chinese tire imports by Washington in 2009, found that American consumers had to spend an extra $1.1 billion on tires, while the tariff protected no more than 1,200 jobs. About $900,000 for every job saved, in other words.

One other thing: The China piece, written by Beijing-based journalist Michael Schuman, notes that higher costs from a tariff might prompt firms merely to move jobs to lower-cost Asian nations — not back to America: “Foxconn, the Taiwan-based company that assembles iPhones in China for Apple, announced last year that it would build as many as 12 new factories in India. That means your next smartphone or pair or bluejeans would more likely be made in Mumbai than in Minneapolis.”

Hey, just slap tariffs on India, too, I guess.

There are 26 comments.

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  1. cdor Member
    cdor
    @cdor

    The numbers given in one of your quoted articles on remittances are somewhat in question ( I believe they are higher). But it was my understanding that they would not be blocked, but instead a fee would be charged. I would assume the government has enough control over banking services that they would be able to require banks to charge a 5 or 10% tariff on funds sent to Mexico. The must know where this money comes from or else they wouldn’t be able to say they are 24.4 billion dollars. Of course Donald Trump wasn’t quoted in either article or by you, so it’s not really helpful to discuss someone’s assumptions about Trump and than draw conclusions based on third party assumptions. Do you have any specifics from Trump himself that we could discuss?

    • #1
  2. Richard Fulmer Member
    Richard Fulmer
    @RichardFulmer

    cdor,
    Regardless of the mechanics of how Trump taxes the remittances, the result would be less money flowing to Mexicans and the possible ill effects listed in the Times article (though G-d forbid I should agree with the NYT).

    A potential problem with high tariffs not mentioned in the Times is the impact on American goods that use components made in China.  Decades ago, for example, the United States imposed high tariffs on the import of Japanese steel.  Japanese steel continued to pour into the U.S., but in the form of finished products – cars, refrigerators, and other appliances – rather than as raw steel.

    • #2
  3. Klaatu Member
    Klaatu
    @Klaatu

    If any further evidence is needed regarding Trump’s lack of seriousness, his plan can be found here.

    • #3
  4. A-Squared Coolidge
    A-Squared
    @ASquared

    cdor: Do you have any specifics from Trump himself that we could discuss?

    Trump uses the same $24 billion number and proposes requiring proof of legal residency before being allowed to wire money.

    You can find the details here.

    It reads like an extortion plot.

    On day 3 tell Mexico that if the Mexican government will contribute the funds needed to the United States to pay for the wall, the Trump Administration will not promulgate the final rule, and the regulation will not go into effect

    Yeah, that will end well.

    • #4
  5. La Tapada Member
    La Tapada
    @LaTapada

    Instead, I would like it if there was a way the U.S. could “lean hard” on Mexico, to get it to do better for its citizens (the lower and middle classes), to reduce corruption and make Mexico a better place to live.

    Every time the Mexican government has a complaint about how the U.S. is treating Mexican immigrants, we should publicly compare it to Mexico’s treatment of its (most vulnerable) citizens.

    • #5
  6. The Cloaked Gaijin Member
    The Cloaked Gaijin
    @TheCloakedGaijin

    James Pethokoukis:Example: Take Donald Trump’s idea of banning remittances unless Mexico pays for his proposed border wall. From a NY Times op-ed:

    There are a number of logistical problems with this plan, including political realities, legality and the feasibility of stemming the flow of these informal payments.

    Sucker Americans work for paychecks with withholding taxes.

    Immigrants work for cash without taxes.

    Why is this policy always allowed to continue?  It’s illegal for illegals to work anyway.  Arrest somebody.  Should all American companies suddenly start paying everyone in cash?  Would they be arrested for doing that?

    Mexico receives $24.4 billion in remittances from immigrants in the United States, which accounts for about 2 percent of Mexico’s gross domestic product. Indeed, withholding this money may actually encourage immigration to the United States.

    That’s a ridiculous figure.

    Whatever is done means more illegal immigration.  That’s the story I always hear.

    You can’t stop remittances.

    You can’t build a wall.

    You can’t send illegals home.

    You can’t put illegals in jail.

    The military can only fight in foreign lands, but they are prevented from guarding our own border?  What a joke!  (Marco Rubio will go to war with Russia to defend Turkey’s border, but he won’t defend America’s borders.)

    America the Superpower is a helpless Gulliver tied down by Lilliputians.

    • #6
  7. A-Squared Coolidge
    A-Squared
    @ASquared

    La Tapada: Every time the Mexican government has a complaint about how the U.S. is treating Mexican immigrants, we should publicly compare it to Mexico’s treatment of its (most vulnerable) citizens.

    I think every time the Mexican government criticizes our immigration policy, we should say, fine, we will adopt Mexico’s immigration policy.  

    Some excerpts from the article

    Mexico welcomes only foreigners who will be useful to Mexican society:

    Foreigners are admitted into Mexico “according to their possibilities of contributing to national progress.” (Article 32)

    Mexican authorities must keep track of every single person in the country:

    Federal, local and municipal police must cooperate with federal immigration authorities upon request, i.e., to assist in the arrests of illegal immigrants. (Article 73)
    A National Population Registry keeps track of “every single individual who comprises the population of the country,” and verifies each individual’s identity. (Articles 85 and 86)

    Foreigners with fake papers, or who enter the country under false pretenses, may be imprisoned:

    Under Mexican law, illegal immigration is a felony. The General Law on Population says,

    “A penalty of up to two years in prison and a fine of three hundred to five thousand pesos will be imposed on the foreigner who enters the country illegally.” (Article 123)

    • #7
  8. Klaatu Member
    Klaatu
    @Klaatu

    The Cloaked Gaijin:

    James Pethokoukis:Example: Take Donald Trump’s idea of banning remittances unless Mexico pays for his proposed border wall. From a NY Times op-ed:

    There are a number of logistical problems with this plan, including political realities, legality and the feasibility of stemming the flow of these informal payments.

    Sucker Americans work for paychecks with withholding taxes.

    Immigrants work for cash without taxes.

    Why is this policy always allowed to continue? It’s illegal for illegals to work anyway. Arrest somebody. Should all American companies suddenly start paying everyone in cash? Would they be arrested for doing that?

    Mexico receives $24.4 billion in remittances from immigrants in the United States, which accounts for about 2 percent of Mexico’s gross domestic product. Indeed, withholding this money may actually encourage immigration to the United States.

    That’s a ridiculous figure.

    Whatever is done means more illegal immigration. That’s the story I always here.

    You can’t stop remittances.

    You can’t build a wall.

    You can’t send illegals home.

    You can’t put illegals in jail.

    The military can only fight in foreign lands, but they are prevented from guarding our own border? What a joke! (Marco Rubio will go to war with Russia to defend Turkey’s border, but he won’t defend America’s borders.)

    America the Superpower is a helpless Gulliver tied down by Lilliputians.

    That may be the greatest number of strawmen in a single post in Ricochet history.

    • #8
  9. FloppyDisk90 Member
    FloppyDisk90
    @FloppyDisk90

    Klaatu: That may be the greatest number of strawmen in a single post in Ricochet history.

    I think what TCG is driving at is the assumption of impotence when it comes to dealing with illegal immigration which is a fair point.

    • #9
  10. Klaatu Member
    Klaatu
    @Klaatu

    FloppyDisk90:

    Klaatu: That may be the greatest number of strawmen in a single post in Ricochet history.

    I think what TCG is driving at is the assumption of impotence when it comes to dealing with illegal immigration which is a fair point.

    Who is making these assumption?  The only assertion I see with any basis in what has actually been said concerns returning illegals to their homes.  Of course, the current tough guy on immigration criticized Romney as being too harsh for saying he could accomplish that through self deportation.

    • #10
  11. FloppyDisk90 Member
    FloppyDisk90
    @FloppyDisk90

    Klaatu:

    FloppyDisk90:

    Klaatu: That may be the greatest number of strawmen in a single post in Ricochet history.

    I think what TCG is driving at is the assumption of impotence when it comes to dealing with illegal immigration which is a fair point.

    Who is making these assumption? The only assertion I see with any basis in what has actually been said concerns returning illegals to their homes. Of course, the current tough guy on immigration criticized Romney as being too harsh for saying he could accomplish that through self deportation.

    Well the NYT article is casting doubts on the feasibility of restricting remittances and, yes, most of the current/ex candidates I think are on record as being against sending illegals home.

    Honestly, I can’t answer the “who” question but I do think there’s a general sense of helplessness.

    • #11
  12. Hypatia Member
    Hypatia
    @Hypatia

    Trump didn’t say block remittances, he said tax ’em.  That is feasible:  have the wire service collect a fee. Non-citizens who are working here legally can either apply for an exemption certificate, like non-profit organizations do so they don’t have to pay sales tax, or they can save their receipts and deduct the amount paid from their taxes when they file a return.

    And  what is this “it’ll discourage immigrants from coming here?”  Yeah, duh, isn’t that the point?

    Not surprised at the Times–owned by Carlos Slim, after all.

    The article makes sense only if our policy is to encourage, not discourage, illegal immigration.

    • #12
  13. A-Squared Coolidge
    A-Squared
    @ASquared

    Hypatia: Trump didn’t say block remittances, he said tax ’em

    No, he proposed drafting up a law that would make it illegal for anyone that could not demonstrate legal residency to do any international wire transfers, and then offer to not implement the law if Mexico paid him enough money.

    The plan was linked above.

    Blocking transfers still wouldn’t work, because you could just pay some homeless guy $10 to put his name on the wire transfer, but it was never intended to work, it’s just an extortion plot.

    • #13
  14. Hypatia Member
    Hypatia
    @Hypatia

    .  Do we WANT 54 billion untaxed dollars leaving here illegally?    (54 B is the figure I read on American Thinker this morning, not only Mexico but including China).  I think it would be great to have a law that people not legally resident here can’t send money out.  Isn’t our goal to reduce the number of people working here illegally?

    As always happens with Trump, in a couple of days people will start admitting that it’s not impossible to implement…then , starting with Cruz, people will start saying it’s not a new idea, after all, then various others starting with Cruz will start taking credit for it.

    • #14
  15. Klaatu Member
    Klaatu
    @Klaatu

    Hypatia:. Do we WANT 54 billion untaxed dollars leaving here illegally? (54 B is the figure I read on American Thinker this morning, not only Mexico but including China). I think it would be great to have a law that people not legally resident here can’t send money out. Isn’t our goal to reduce the number of people working here illegally?

    As always happens with Trump, in a couple of days people will start admitting that it’s not impossible to implement…then , starting with Cruz, people will start saying it’s not a new idea, after all, then various others starting with Cruz will start taking credit for it.

    It is false to claim the money being sent out of the country is necessarily untaxed?  The vast majority of illegals pay taxes, usually through the use of tax ID numbers.

    • #15
  16. A-Squared Coolidge
    A-Squared
    @ASquared

    Hypatia: Do we WANT 54 billion untaxed dollars leaving here illegally? (54 B is the figure I read on American Thinker this morning, not only Mexico but including China). I think it would be great to have a law that people not legally resident here can’t send money out. Isn’t our goal to reduce the number of people working here illegally?

    The problem is, it won’t work.  I’m fine with the law, but let’s not fool ourselves it will have any impact.

    • #16
  17. FloppyDisk90 Member
    FloppyDisk90
    @FloppyDisk90

    A-Squared:

    Hypatia: Do we WANT 54 billion untaxed dollars leaving here illegally? (54 B is the figure I read on American Thinker this morning, not only Mexico but including China). I think it would be great to have a law that people not legally resident here can’t send money out. Isn’t our goal to reduce the number of people working here illegally?

    The problem is, it won’t work. I’m fine with the law, but let’s not fool ourselves it will have any impact.

    <Deleted…I misread the point here>

    • #17
  18. Hypatia Member
    Hypatia
    @Hypatia

    Klaafu:  I just looked up that claim about “illegals pay taxes”–incredible!  To use an ITIN, they have to use a fake SSN or one belonging to someone else!  And the IRS colludes in this!  Something else that has to be fixed.   But  it’s not “the majority “of ’em, in any event.   Taxing wire transfers could catch a lot of tax $$ that’s slipping out of US.

    Cloaked Gaijin,  we CAN stop remittances, build a wall, jail or deport illegal immigrants, and, I might add, defund sanctuary cities.  It just takes someone with the political will to do it.  And the message has to be, if you get in, you can’t stay.  So far, on many levels, the message from our govt is: if you get in, you CAN stay.

    • #18
  19. Freesmith Member
    Freesmith
    @Freesmith

    “Nothing can be done.”

    The argument in the Times, advanced by AEI minion Jimmy P concerning remittances, is typical of those put forward by a decadent ruling elite. It declares that nothing can be – or should be – done for the squeezed people in the middle.

    The corollary is the doctrine of “Too Big To Fail,” which holds that the institutions and perquisites of the ruling class must be preserved at all costs.

    • #19
  20. Klaatu Member
    Klaatu
    @Klaatu

    Hypatia:Klaafu: I just looked up that claim about “illegals pay taxes”–incredible! To use an ITIN, they have to use a fake SSN or one belonging to someone else! And the IRS colludes in this! Something else that has to be fixed. But it’s not “the majority “of ’em, in any event. Taxing wire transfers could catch a lot of tax $$ that’s slipping out of US.

    The information I have seen said more than 50% of illegal immigrants were net income tax payers and 75% paid Social Security taxes which they are ineligible to collect.

    Again, Trump’s plan is not to tax remittances.  Were it to do so, he would be raising taxes on Americans as much or more than on anyone else.

    • #20
  21. Klaatu Member
    Klaatu
    @Klaatu

    Freesmith:“Nothing can be done.”

    The argument in the Times, advanced by AEI minion Jimmy P concerning remittances, is typical of those put forward by a decadent ruling elite. It declares that nothing can be – or should be – done for the squeezed people in the middle.

    The corollary is the doctrine of “Too Big To Fail,” which holds that the institutions and perquisites of the ruling class must be preserved at all costs.

    Leaving aside the Marxist-like invocation of the decadent ruling elite, how does stopping people from sending their money out of the country help the “squeezed people in the middle”?

    • #21
  22. cdor Member
    cdor
    @cdor

    America has always been a trading nation. Under the Trump administration trade will flourish. However, for free trade to bring prosperity to America, it must also be fair trade. Our goal is not protectionism but accountability. America fully opened its markets to China but China has not reciprocated. Its Great Wall of Protectionism uses unlawful tariff and non-tariff barriers to keep American companies out of China and to tilt the playing field in their favor.”

    Is there some kind of “principled Conservative” objection to this actual quote from the Trump website?

    • #22
  23. cdor Member
    cdor
    @cdor

    A-Squared:

    cdor: Do you have any specifics from Trump himself that we could discuss?

    Trump uses the same $24 billion number and proposes requiring proof of legal residency before being allowed to wire money.

    You can find the details here.

    It reads like an extortion plot.

    On day 3 tell Mexico that if the Mexican government will contribute the funds needed to the United States to pay for the wall, the Trump Administration will not promulgate the final rule, and the regulation will not go into effect

    Yeah, that will end well.

    My question is who’s extorting whom? Take a peak at Mexico’s immigration laws. If they were running our country, the border would be clearly marked in blood red. They wouldn’t have any issues with remittances, except for perhaps remitting bodies

    • #23
  24. Klaatu Member
    Klaatu
    @Klaatu

    cdor:

    A-Squared:

    cdor: Do you have any specifics from Trump himself that we could discuss?

    Trump uses the same $24 billion number and proposes requiring proof of legal residency before being allowed to wire money.

    You can find the details here.

    It reads like an extortion plot.

    On day 3 tell Mexico that if the Mexican government will contribute the funds needed to the United States to pay for the wall, the Trump Administration will not promulgate the final rule, and the regulation will not go into effect

    Yeah, that will end well.

    My question is who’s extorting whom? Take a peak at Mexico’s immigration laws. If they were running our country, the border would be clearly marked in blood red. They wouldn’t have any issues with remittances, except for perhaps remitting bodies

    Who is Mexico extorting with their border laws?

    • #24
  25. Freesmith Member
    Freesmith
    @Freesmith

    Klaatu:

    Freesmith:“Nothing can be done.”

    The argument in the Times, advanced by AEI minion Jimmy P concerning remittances, is typical of those put forward by a decadent ruling elite. It declares that nothing can be – or should be – done for the squeezed people in the middle.

    The corollary is the doctrine of “Too Big To Fail,” which holds that the institutions and perquisites of the ruling class must be preserved at all costs.

    Leaving aside the Marxist-like invocation of the decadent ruling elite, how does stopping people from sending their money out of the country help the “squeezed people in the middle”?

    The squeezed people in the middle want the border of their country enforced and an end to illegal immigration.

    Remittances incentivize illegal immigrants by allowing them to support their families back home from income earned after their illegal entry into the US. Therefore the incentive works against the desires of US citizens.

    By sending multi-billions of dollars out of the US economy remittances remove those funds from circulating within the US, where the multiplier effect can positively affect the US neighborhoods where the income was earned. Those dollars should stimulate American economic activity, rather than Mexican.

    Finally, taxes on those remittances, if they were allowed, would make Mexico pay for the wall that their government’s malfeasance and unneighborliness has made necessary, sparing the tax-paying middle-class of America of that burden. Justice would be served.

    Glad to help out.

    • #25
  26. Klaatu Member
    Klaatu
    @Klaatu

    Freesmith:

    Klaatu:

    Freesmith:“Nothing can be done.”

    The argument in the Times, advanced by AEI minion Jimmy P concerning remittances, is typical of those put forward by a decadent ruling elite. It declares that nothing can be – or should be – done for the squeezed people in the middle.

    The corollary is the doctrine of “Too Big To Fail,” which holds that the institutions and perquisites of the ruling class must be preserved at all costs.

    Leaving aside the Marxist-like invocation of the decadent ruling elite, how does stopping people from sending their money out of the country help the “squeezed people in the middle”?

    The squeezed people in the middle want the border of their country enforced and an end to illegal immigration.

    Remittances incentivize illegal immigrants by allowing them to support their families back home from income earned after their illegal entry into the US. Therefore the incentive works against the desires of US citizens.

    By sending multi-billions of dollars out of the US economy remittances remove those funds from circulating within the US, where the multiplier effect can positively affect the US neighborhoods where the income was earned. Those dollars should stimulate American economic activity, rather than Mexican.

    Finally, taxes on those remittances, if they were allowed, would make Mexico pay for the wall that their government’s malfeasance and unneighborliness has made necessary, sparing the tax-paying middle-class of America of that burden. Justice would be served.

    Glad to help out.

    That is a valiant but ultimately flawed attempt at  rationalization.

    Giving people what they want is not necessarily helping them and dollars ultimately must be spent in the US.  Dollars sent to Mexico do not get put under a mattress but exchanged for pesos and the dollars make their way back to us.

    Here I thought conservatives were generally opposed to government telling people what to do with their money and taxing the same money multiple times.

    • #26

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