How Trump’s wall could beckon a global trade war
But Mexico — or other trading partners — could try to punish Trump and other supporters of the tax by targeting goods in politically sensitive areas, said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.
“The Mexican minds will be thinking about what they could do that would give President Trump the most pain in his political base,” he said, adding that that might mean “stopping imports of certain products made in Indiana or Michigan or wherever.”
And they could go after areas not directly associated with legal trade.
“They can do all sorts of things we don’t like,” Hufbauer said. “They can legalize marijuana. They can legalize cocaine. They can stop cooperating with the U.S. with respect to refugees from Guatemala, Honduras and so forth.”
The plan, which would target imports while allowing tax-free exports, would boost the value of the dollar, giving customers more purchasing power to manage the higher costs, supporters say.
.. And proponents maintain the costs would even out eventually, even with what Ikenson called a likely “adjustment period” at the start.
.. “But 97 percent of American importers are small businesses, [companies] with under 500 employees. … Small businesses are in the center of the bulls eye in this law.”