Media reports have suggested that the US could impose a 20% tariff on imports from Mexico to pay for the new President's commitment to build a wall to enhance security on the US-Mexico border. However, there could also be a more subtle change to corporate taxation through a 'border adjustment' aimed at encouraging exports.
White House press secretary Sean Spicer has suggested that a deal is close on a corporate tax reform that could include a 'border-adjustment'. The adjustment would tax imports and also exclude revenues from exports from the profit figure used to calculate corporation tax. It would resemble a VAT
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Unlike a straight import tariff, it would likely not be viewed as barrier to trade – something that could invite retaliation from other countries. However, the import tax would raise money for the US Treasury.
Many commentators says that the new administration in Washington has tax reform as a top priority and the political timing could be good to include a border adjustment that stops short of a potentially explosive import tariff.
Media reports citing remarks from Trump administration officials suggest that a number of options are being assessed regarding trade with Mexico. Mexican President Enrique Peña Nieto cancelled a planned meeting with the US president after he signed an executive order to begin the process of building the border wall between the two countries. He has repeatedly said that Mexico will pay for it.
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