This story is republished from NM Political Report, a nonprofit news outlet, as a part of our commitment to bringing you the best in independent news coverage that matters to Albuquerque.
By Nicole Maxwell, NM Political Report
President-elect Donald Trump has promised sweeping changes to the tax code as well as imposing tariffs that could negatively affect New Mexicans.
Tariffs are not paid for by the goods’ country of origin and are instead paid for by the buyer in the United States.
So those shoes you bought off Amazon that are being shipped from overseas have shipping costs that you, the purchaser, pay including any taxes and tariffs accrued on the shoes ordered.
“If (Trump is) successful in imposing a nationwide tariff on imported goods, it will have some significant effects on New Mexicans,” University of New Mexico Associate Professor of Finance Reilly White told the NM Political Report. “(Tariffs are) always generally bad for the economy, because they make stuff more expensive for businesses and more expensive for consumers.”
White said that most U.S. imports are called “intermediate goods” that are used to complete products such as wheat, soil, crude oil and sugar.
“If tariffs are, for example, 10 percent on an imported good, that means that that firm who’s buying that widget or that mechanical item from China or a company buying something from South Africa will be paying more for that for that good, because there’s not always, in many cases, for most products and services of this nature, an easy domestic equivalent,” White said. “We use so many things, input parts for computers, all the way to everything that’s made or manufactured has some international and global supply chain component. There’s food that we get overseas, everything else, if a duty is sort of slapped onto that, that will result in higher prices that consumers will ultimately have to pay unless there is an American-made equivalent, and there isn’t always that case.”
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The tariffs seem to be an attempt by Trump to bring jobs outsourced overseas back to U.S. shores. An issue that may not be possible since supply chains are a global system and have been since the end of World War II in 1945, White said.
“So for instance, we have many parts of our supply chains, many parts of our systems that just don’t exist in this country,” White said. “So we don’t have enough workers to even occupy places where we could produce all the parts that are needed, for instance, in a car, or all the input parts we might need for a computer, all of those, we just don’t have those factories and resources. And even if the tariffs are so high that they force these factories to be built, it’s going to be years and years and years before we develop the expertise, and the final product may not even be as good as the imported products in the long run. And so, there is not always clear substitution probable for much, much, much of the supply chain. And that’s one of the biggest issues that we have.”
The tariffs themselves could harm the economy at large, New Mexico Taxation and Revenue Department spokesman Charlie Moore told NM Political Report.
“We are concerned that President-elect Trump’s stated plan to impose steep tariffs on foreign goods would damage the economy, both nationally and in New Mexico. Tariffs could amount to a significant new tax on all Americans when businesses pass these costs on to consumers in the form of higher prices,” Moore said.
Trump’s proposed tariffs include a 20 percent tax on all foreign goods with a 60 percent price hike on Chinese goods.
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Knowing what could be on the horizon is one thing, but taking action to protect U.S. consumers is another.
U.S. Rep. Melanie Stansbury, a Democrat representing the 1st Congressional District, said that Congress can take some action, but any action to curb the proposed tariffs could be all for nought with the Republican-controlled House and Senate.
“Now, the President and his economic policy council and his foreign trade arms have a tremendous amount of executive power to execute on foreign policy as it relates to tariffs and other other economic tools, there is a lot of conversation within the Trump sphere that his extreme policies on tariffs are a negotiating tactic that he’s trying to scare China so that he can achieve some other kind of economic outcome,” Stansbury said during a press call last week. “But the reality is every single economist who has looked at Donald Trump’s tariff policies has identified that they will lead to an increase in inflation across the board… Can Congress do anything about it? Certainly we could curb and not provide congressional consent by passing legislation to stop tariffs. But unfortunately, we have a Congress that we know is likely to be beholden to and partner very closely with Donald Trump next year.”
Legislation cannot be moved in the U.S. House floor without the house speaker agreeing to it, Stansbury said,
The current house speaker is Trump ally Mike Johnson, R-Louisiana, who is likely to remain house speaker.
“So there is nothing going to move through the house in the next two years while Mike Johnson is speaker that does not have the direct support and consent from Trump,” Stansbury said.
Tax cuts for the top
Historically, Trump has issued tax cuts for the wealthy as he did in 2017. These tax cuts expire in 2025.
“The Trump tax cuts of 2017 were targeted to the wealthiest Americans, adding to the national debt and widening the wealth gap. Gov. Lujan Grisham believes new national tax reform proposals should be designed to benefit working families, not millionaires, billionaires and wealthy corporations,” TRD spokesman Moore said.
The nonpartisan research and policy institute, the Center on Budget and Policy Priorities suggests a course correction to undo damage done by these tax cuts that, it concluded, favored the rich, eroded the U.S. tax base and failed to deliver promised economic benefits.
The tax cuts were primarily for those making $400,000 per year or more and did not trickle down.
The trickle down economic theory states that if money or tax breaks are given to the wealthy, then the money will trickle down to the poor. “Institute on Taxation and Economic Policy … is estimating that based upon the impact on tax changes, they expect that for the poorest that Trump’s tax policies will fall disproportionately on lower income Americans, and that’s you’ll see higher increases in costs from the poorest 20th of the population all the way up to people making $360,000 a year,” White, the UNM professor, said. “So the people that are making above $360,000, which are, roughly, the top 5 percent of Americans by income should see tax cuts in Trump’s proposal.”