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| President Donald Trump walks on the tarmac as he waves to the crowd upon his arrival at Andrews Air Force Base, Md., Thursday, Jan. 26, 2017. Trump was returning from Philadelphia after speaking at the House and Senate GOP lawmakers at their annual policy retreat. |
WASHINGTON
(AP) -- President Donald Trump's determination to wall off
America's border with Mexico triggered a diplomatic clash and fresh
fight over trade Thursday as the White House proposed a 20 percent tax
on imports from the key U.S. ally and Mexican President Enrique Pena
Nieto abruptly scrapped next week's trip to Washington.
The
swift fallout signaled a remarkable souring of relations between
Washington and one of its most important international partners just
days into the new administration. The U.S. and Mexico conduct some $1.6
billion a day in cross-border trade, and cooperate on everything from
migration to anti-drug enforcement to major environmental issues.
At
the heart of the dispute is Trump's insistence that Mexico will pay for
construction of the massive wall he has promised along the southern
U.S. border. Trump on Wednesday formally ordered construction of the
wall.
The plan was a centerpiece of Trump's
election campaign, though he never specified how Mexico would fund the
project or how he would compel payments if Pena Nieto's government
refused.
The two leaders had been scheduled to
discuss the matter at the White House next week. But Pena Nieto took to
Twitter Thursday to say he had informed the White House he would not be
coming.
In a speech in Philadelphia later
Thursday, Trump cast the cancellation as a mutual decision. He said that
"unless Mexico is going to treat the United States fairly, with
respect, such a meeting would be fruitless, and I want to go a different
route. We have no choice."
On the flight back
to Washington, Trump's spokesman told reporters the president was
considering the 20 percent import tax to foot the bill, the most
specific proposal Trump has ever floated for how to cover a project
estimated to cost between $12 billion and $15 billion.
"By
doing that, we can do $10 billion a year and easily pay for the wall
just through that mechanism alone," Spicer said. "This is something that
we've been in close contact with both houses in moving forward and
creating a plan."
Spicer said Trump was
looking at taxing imports on all countries the U.S. has trade deficits
with, but he added, "Right now we are focused on Mexico."
But
the announcement sparked immediate confusion across Washington, and the
White House tried to backtrack. During a hastily arranged briefing in
the West Wing, chief of staff Reince Priebus said a 20 percent import
tax was one idea in "a buffet of options" to pay for the border wall.
A
20 percent tariff would represent a huge tax increase on imports to the
U.S., raising the likelihood of costs being passed on to consumers.
Half of all non-agricultural goods enter the U.S. duty free, according
to the office of the U.S. Trade Representative. The other half face
import tariffs averaging 2 percent.
Mexico is
one of America's biggest trade partners, and the U.S. is the No. 1 buyer
from that country, accounting for about 80 percent of Mexican exports. A
complete rupture in ties could be damaging to the U.S. economy and
disastrous for Mexico's. And major harm to Mexico's economy would surely
spur more people to risk deportation, jail or even death to somehow
cross the border to the U.S. - undercutting Trump's major goal of
stopping illegal immigration.
To some
congressional Republicans, Spicer's comments appeared to be a welcome
embrace of border adjustment tax, a core element of House Speaker Paul
Ryan's tax reform proposal. As part of that proposal, a 20 percent
corporate tax rate would apply to goods and services consumed in the
U.S. but not applied to exports from America.
Earlier
this month, Trump called that concept confusing. And during the White
House's clean-up efforts Thursday, Spicer wouldn't say whether Trump
agreed with the border adjustment tax being considered by the House GOP.
The
new president has previously raised the prospect of slapping tariffs on
imports, but had not suggested it as a way to pay for the border wall.
There's
also disagreement within his new administration over the effectiveness
of tariffs in general. Wilbur Ross, Trump's nominee for commerce
secretary, dismissed tariffs for trade negotiations during his
confirmation hearing, saying the 1930 Tariff Act "didn't work very well
then and it very likely wouldn't work now."
Pena
Nieto has faced intense pressure at home over his response to Trump's
aggressive stance toward his country. Until this week, Mexico had tried
its traditional approach of quiet, cautious diplomacy combined with
back-room discussions, sending Cabinet officials for talks with the
Trump administration.
But that changed when
Trump decided to announce his border wall on Wednesday - the same day
that two senior Mexican Cabinet ministers arrived in Washington for
preliminary talks ahead of what was to be a presidential tete-a-tete.
Many Mexicans were affronted by the timing, and Pena Nieto faced a
firestorm of criticism at home.
The diplomatic
row recalls the rocky days of U.S.-Mexico relations in the 1980s, prior
to the North American Free Trade Agreement, a pact that Trump has
vigorously criticized.
"There is a change in
the understanding that had been in operation over the last 22 years,
when Mexico was considered a strategic ally," said Isidro Morales, a
political scientist at the Monterrey Institute of Technology and Higher
Education. "Trump has unilaterally broken with this way of doing
things."
