Trump raised the idea of the new tax as a possible way to finance a wall that would straddle the border separating the U.S. from Mexico, currently its third largest partner in the trade of goods, according to the U.S. Trade Representative.
William Gale, co-director of the Tax Policy Center, says that while a stronger dollar could minimize the pain U.S. shoppers feel, "the irony of putting a tariff on Mexican goods is that, to the extent it raises consumer prices in the U.S., consumers will be paying for the wall, not Mexican producers.''
Mexico sent $295 billion worth of goods across the U.S. border in 2015, the office of the Trade Representative says. Overall, U.S. imports from its southern neighbor peaked at $316.4 billion that year. That's in contrast to Mexican-bound exports from the U.S. that amounted to $267.2 billion.
The biggest import is cars, with the U.S. spending $74 billion in 2015 for the hundreds of thousands of Chevrolet and Ram trucks, as well as Volkswagens, Fords, Hondas, Nissans and other brands that are assembled in Mexican factories.
But cars are far from the only product that U.S. importers bring in from Mexico. Other key categories include machinery, medical instruments, and mineral fuels.The country is also the U.S.' second-biggest provider of agricultural products, with imports amounting to $21 billion in 2015.
"It is very troubling for world food and agricultural markets for Administration spokespersons to bandy about terms like a 20% tax on all imports from Mexico or other countries,'' Tom Stenzel, President and CEO of the United Fresh Produce Association said in a statement. "Consider the impact on American consumers of a 20% hike in the cost of foods such as bananas, mangoes and other products that we simply cannot grow in the United States. Consider also what other countries would do to block U.S. exports in retaliation. As the Administration looks to incentivize manufacturing jobs in the U.S., we urge President Trump to consider the unique nature of food and not place a new food tax on American consumers."
Fresh vegetables purchased from Mexico totaled $4.8 billion in 2015, according to the office of the Trade Representative. Snack food imports totaled $1.7 billion, while wine and beer $2.7 billion and processed fruit and vegetables peaked at $1.4 billion two years ago
Representative Lloyd Doggett, D-Texas, said in a statement that a tariff would not only "disrupt Texas commerce with our most important trading partner, but it would raise consumer prices by 20% on many goods, like so much of the fresh produce upon which we rely at this time of year.''
Automakers have flocked across the border, not only lured by low wages, but to tap into a skilled labor force and Mexico's multitude of trade deals with countries across the globe.
The U.S. has made use of services from Mexico in transportation, travel, technology and other industries. Such imports amounted to roughly $21.6 billion in 2015, 11% more than the year before, and roughly 191% more than what was spent on imported services in 1993, before NAFTA.