From the day he threw his hat into the ring for Leader of the Free World, Donald Trump has taken a strong and controversial stance on the issue of illegal immigration. In fact, Trump, who is on track to become the Republican Party’s nominee for president, strongly believes that if it wasn’t for him, ‘‘...[the media] wouldn’t even be talking about illegal immigration,’’ because according to him, ‘‘[it] was not a subject that was on anybody’s mind until [he] brought it up at [his] announcement.’’
Throughout his journey on the campaign trail, Trump has repeatedly promised his supporters that if elected he would deport all of the more than 11 million undocumented immigrants currently in the United States, and many political pundits have argued that Trump’s proposed immigration policies have propelled him to front-runner status in the Grand Old Party (GOP). This is because a large number of Trump supporters believe illegal immigration spurs issues such as national security threats, as well as lower wages and fewer employment opportunities for the average American worker.
One of Trump’s signature plans for immigration reform is to construct a wall, which he hopes at some point will be called the "Trump Wall,", along the 2,000-mile border between the United States and Mexico. He estimates that this wall will cost anywhere from $8 billion to $10 billion, and he is ‘‘100% [certain]’’ that he would be able to foot the entire cost of construction to the Government of Mexico. When questioned by a journalist on how exactly he intends to make Mexico pay for the ‘‘Trump Wall’,’ Trump typically gives a vague answer that mentions America’s 2015 trade deficit with Mexico of $58.3 billion.
While Trump has insisted that his proposed wall would be completely financed by funds from the Mexican Government, President Enrique Peña Nieto, the country’s current head of state, as well as his predecessors Felipe Calderón and Vicente Fox, have all publicly stated that the chances of anything like this happening are pretty much zero. With that being said, the possibility is not as far-fetched as some people believe it to be. Although there is no surefire way to know what exactly Trump is thinking of doing, it is pretty safe to say that he would implement various fiscal policies that would indirectly result in Mexico paying for the wall. Below we will explore a handful of ways that Trump can possibly get the Mexican Government to pay for his proposed wall on the U.S. southern border.
Taxing Remittance Payments to Mexico
Many families in Mexico heavily rely on this source of income to pay for their living expenses. In 2015 alone, Mexicans living abroad sent more than $24.8 billion back home, and the vast majority of those funds came from the United States. To put that into perspective, remittances to Mexico in 2015 accounted for 2% of the country’s Gross Domestic Product (GDP) and also exceeded the country’s income from oil reserves which totaled $23.4 billion during that year.
A tax on this outflow of money could create a significant funding source for the wall. Let us assume, for example, that out of the $24.8 billion Mexico received in remittances last year, $20 billion came from the U.S. If those funds were taxed at a rate of 2%, the government could have collected approximately $400 million. A much higher 5% or 10% tax would have resulted in $1 billion and $2 billion in tax revenue respectively. (For related reading, see: An America with Donald Trump as President.)
Implementing High Import Taxes on Goods from Mexico
On numerous occasions, Trump has argued that many of America’s trade deals do not actually benefit the economy. One of his victims of criticism is the North American Free Trade Agreement (NAFTA) which Trump has referred to as a ‘‘disaster’’ and even went on to say that there ‘‘shouldn’t be [[one]]’’. Additionally, Trump has constantly brought attention to the fact that the U.S.’s trade deficit with Mexico in 2015 was $58 billion. Under current trade agreements such as NAFTA, many goods imported from Mexico either enter the U.S. with very little import duties attached to them or none at all. Trump has suggested that charging an import tariff on goods entering the U.S. from Mexico is one avenue in which the Mexican government can indirectly pay for his wall. In addition to being an untapped source of government revenue, an import tax on Mexican manufactured goods will give less cost saving incentives to American companies who wish to move their manufacturing operations outside of the country.
(See also, How Donald Trump Survived Near Bankruptcy.)
The Elimination of Foreign Aid to Mexico
Like many developing countries, Mexico receives a significant amount of foreign aid from the United States every year. In 2012 and 2013, the amount of U.S. foreign aid received provided to Mexico was $214 million and $419 million respectively. This money is allocated to a number of different causes including military assistance, narcotics control and environmental protection. A Trump administration can reduce, or even eliminate, this aid to raise money for the construction of the wall. (You might also like, 4 Reasons Why Americans Retire in Mexico.)
The Bottom Line
Immigration reform has been at the heart of Donald Trump’s campaign message since the launch of his bid for President. Throughout his campaign, Trump has promised to not only build a wall on America’s southern border but also to have the Mexican Government finance the construction of that wall. He can achieve this through many avenues including, taxing remittance payments to Mexico from the U.S., renegotiating current trade agreements with Mexico while implementing higher import taxes on all Mexican manufactured goods. Trump would also be able to raise a sizeable amount of money for the wall if he reduces, or even eliminates U.S. foreign aid to Mexico.