Donald Trump, the President of America, has surprised all by announcing taxes on Mexican goods up to 25%, starting in June and then rising 5% a month. He said:
“I am invoking the authorities granted to me by the International Emergency Economic Powers Act. Accordingly, starting on June 10, 2019, the United States will impose a 5 percent Tariff on all goods imported from Mexico…
The Tariffs will be raised to 10 percent on July 1, 2019… Tariffs will be increased to 15 percent on August 1, 2019, to 20 percent on September 1, 2019, and to 25 percent on October 1, 2019. Tariffs will permanently remain at the 25 percent level.”
The above is conditional on Mexico doing something about immigration coming from down south, such as starving Venezuelans.
Whether they are doing enough will be determined solely at Trump’s discretion, which presumably means he plans to levy the full 25% if he can.
Just recently he lifted taxes on Canadian steel and aluminium. There he didn’t say anything about immigration. Nor are poor immigrants, which are mostly women and children according to Trump, being blamed for his aim to tax German goods.
After cutting taxes for mainly the rich, Trump is now effectively imposing a huge tax on middle America and the poor.
Immigrants is being used here as a code word for the others, not you, but really what they mean is the poor in general. Whether native or immigrant, white or black, all poor and middle class Americans will disproportionately pay on what is effectively a tax on bread or in this case tomatoes and other veg imported from Mexico.
“A 5 per cent tariff would add approximately $3 a barrel to US crude imports from the country if Mr Trump makes good on his threat to include ‘all goods’ from Mexico under his plan.
That could potentially make Mexican crude oil uncompetitive for US refiners, setting off a scramble for alternative supplies at a time when the oil market has already been strained by Washington’s sanctions on Iran and Venezuela.”
So says FT, suggesting petrol prices will rise. That’s effectively a tax on rural America the most which needs a car to get to work. In cities, public transport is usually sufficient.
Moreover unlike with China where there is a massive trade imbalance, here there is effectively none.
Mexico sold to America about $345 billion worth of goods. America sold to Mexico $300 billion. So why the tax?
With the government debt levels continuing to grow, someone has to pay. Billionaire Trump of course is not gone make himself and his rich friends pay for it. They instead get tax cuts.
Bread, and goods in general, are a massive market for taxation. A cash cow for the rich to milk. Taxes on fuel as well can bring a lot of money to lower the great burden the rich carry in their taxation which often amounts to effectively zero.
Instead of helping the uneducated poor who voted from Trump, he is effectively stripping from them whatever little breadcrumb they may have while stroking up prejudices against their other poor friends to distract from the fact fat cats are getting way fatter.
So we have here the results of nationalism, and so far they’re not very good. With pretty much all global stocks down.
Global stocks fall, May 2019
The Mexican Peso is down as well by about 5%, so making Mexican goods a bit cheaper for Americans, while those $300 billion American goods are now quite a bit more expensive.
Meaning Americans might sell less to the world, rather than more. Making the poor even poorer.
In Britain, nationalist Brexit has plunged the pound to now just $1.25, down from $1.5 or so before the mess. That’s $250 for every £1,000.
Pound on a dive, May 2019
Anything they buy is now quite a bit more expensive for Brits. Their goods are now cheaper, but that means they’re getting less money for the same effort.
That’s the poor and the middle class of course, the rich are probably making quite a bit of money from shorting the pound. They’ve also probably moved their funds to assets, including maybe bitcoin.
Rich Mexicans and even Americans might do the same with Chuck Grassley, the veteran Iowa Republican senator, telling Trump to “consider alternatives,” such as a fee on remittances.
Tax their bread not ours, he may have well said. Except smart Mexicans may well turn to bitcoin.
There’s currently a slight premium there in Bitso, a Mexican crypto exchange. Meaning all this war on the poor may well benefit bitcoin and any poor bitcoin holder.
It would have been a lot nicer however if America did not turn on its own neighbor. Europe has lifted some 250 million Eastern Europeans to near first class standards, while America has done what?
The Public Turning?
It looks like Trump is losing popularity with the American public which is now perhaps not very sure about rowing with own friends or with kicking neighbors, women and children, out.
Trump approval ratings, May 2019
Back in January 2017, which is when the above chart starts, only 37% disapproved of Trump, 46% approved.
Now, some 54% of Americans disapprove. Only 42% approve of their own president. All of which of course is very relevant to the upcoming election in 2020.
Whether that will be a coronation, remains to be seen, with presidents in their second term usually being far more cavalier as they don’t have another term to look forward to.
That could mean more exercises of emergency power to bypass congress and thus the people, potentially taxes on European goods which of course would make Europeans a bit colder towards their cousins, and we hope no new war, but they’re obsessed with Iran for some reason.
To blame of course is Generation X, the 40-50 something, which took leave of politics, and thus goes down in history as generation no name.
Millennials will not make the same mistake, but for the first time in history the older generation is more numerous than the young.
A generation that sent us to war and kept us there for two decades, bankrupted our banks, sank our governments into debts and now wants us to row with our own friends and neighbors.