Avocado fans have been tweeting, some tongue-in-cheek, about possibly hoarding the fruit in light of the latest piece of policy news that has come from the White House.

As the Trump administration continues to explore ways to fund the wall on the Mexican border, the White House Press Secretary Sean Spicer revealed one possible solution that is under consideration.

On board Air Force One yesterday, Spicer said the President is looking at comprehensive tax reform that involves taxing imports from countries the U.S. has a trade deficit with, like Mexico. Spicer went on to say that the U.S. could "easily pay for the wall just through that mechanism alone."

In 2015 the U.S. goods and services trade deficit with Mexico was $49.2 billion. This figure was higher for goods alone at $58.8 billion. Spicer explained that if U.S. exports were exempt and a 20% tax on imports was imposed, the administration would come up with $10 billion for the wall in a year. (See also: How Much Will Trump's Wall Really Cost?)

 

Earlier in the day, Mexico's President Enrique Peña Nieto made it clear in a video address to his nation that the country would not be paying for the wall. His meeting with President Trump was also canceled, and Trump tweeted, "The U.S. has a 60 billion dollar trade deficit with Mexico. It has been a one-sided deal from the beginning of NAFTA with massive numbers of jobs and companies lost. If Mexico is unwilling to pay for the badly needed wall, then it would be better to cancel the upcoming meeting."

Big Border Tax or Border Adjustment Tax?

What Spicer spoke about sounds like the border adjustment tax Republicans like Paul Ryan have been asking for. This sort of tax subsidizes exports and taxes imports. However, Trump has previously spoken about a "big border tax" that is much more targeted and focused, as Howard Gleckman of the Tax Policy Center pointed out. Trump had previously called the Republicans' plan "too complicated." Either Spicer misspoke or Trump is now leaning towards a greater business tax overhaul that he originally expressed.

Which Companies Will Be Affected by a Tax on Imports?

According to government data, the top categories of goods imported from Mexico in 2015 were vehicles ($74 billion), electrical machinery ($63 billion), machinery ($49 billion), mineral fuels ($14 billion), and optical and medical instruments ($12 billion). Mexico is America's third largest supplier of goods and second largest supplier of agricultural products.

Fortune reported that Target (TGT) CEO Brian Cornell personally visited Washington to lobby against the House Republicans' proposal. Speaking to AP about new taxes on cars imported from Mexico, Marina Whitman, a business professor at the University of Michigan and a former vice president at General Motors Co.(GM), said, “I don’t think the auto industry would turn up its feet and die, but it would be a terrible shock. It would create mayhem with their profitability."

"A border adjustment scheme would be a risky experiment for the American economy,” said National Retail Federation senior vice president for government relations David French at a conference recently. “Economic theorists are playing with fire and it’s the consumer who ultimately will lose.”

While a tax on imports will stop companies from taking advantage of the current tax system, it is expected that they would pass this cost down to consumers. Economists have also argued that a border adjustment tax would end up strengthening the dollar and affect the value of U.S. foreign direct investment in Mexico.

Interestingly, Mexico was the second largest market for goods from the U.S. in 2015 and third largest in 2014. 

 
 

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