US-Mexico tariffs' effects on American taxes

A 5% tariff on Mexican goods would mean a $17.3 billion tax increase, according to the Tax Foundation.
4:52 | 06/04/19

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Transcript for US-Mexico tariffs' effects on American taxes
A little more on how the impact of these tariffs will be felt by millions of American families are one and bringing Kyle. Palmer allow he's the chief economist at the Tax Foundation a nonpartisan leading think tank here in Washington coverage to see you've been crunching the numbers are on these tariffs. They are hitting everything from avocados to shabby Silverado is all those products from Mexico there are largest trading partner. What's the real impact on real Americans what will this be if the 5% tariffs the president talked about today actually do take effect next week yet. So it's important to think about a tariff as attacks because that's what it really is minutes going to be attacks on a lot of consumer products that Americans by. It's also going to be a big tax on what producers in the United States used to produce goods and services alternately families are gonna bear that burden. And you mentioned that Mexico's when it is our largest trading partner hundreds of billions of dollars in imports this this 5% tariff. Will on top of the other tariffs that the president has either enacted or threatened. You add up to be one of the largest tax increases in the last thirty years on on Americans. Wow that's that is staggering. I want to drill down on that and a second but to your first point on. How this will impact the prices for all of us just wanting illustrate one example sort of caught my rights to pull late. The fast food chain put out a statement let's put their statement on what this 5% tariff would mean for them the company. I told this is a short time ago that if the president's terror. Does going to affect it would increase their cost about fifty million dollars this year. That would cut into their profit margins were according to thirty basis points and they're considering a price hike for food. At their restaurants they say would only be about five cents per burrito at salt sound small but if you. Sort of add up those Nickels on products all across the country. At all different sorts of stores and chains it it it does add up for people we should say though that chipotle tells us they're not considering. Find the much cheaper pre mash or process avocados they're gonna stick to the real thing. For now but Jordan. On as we look at this eight at the prices that I was talking about chipotle Esther is threatening there. On the Mexicans are are pretty optimistic they've arrived in Washington we heard from the foreign minister short time ago he says. He thinks that the import to imposition of tariffs. Can be avoided here. Sort of some news out of out on the Mexican side we heard from the White House officials ahead of this big meeting tomorrow. Yet DeVon at one of the concerns obviously is that the president isn't going to be in room for those critical meetings. I and eyes Yunel out a lot of deals. Don't get made unless the president had his face out here means to be seen whether the president will be satisfied. With those talks but DeVon it sounds to me like the president wants to see these going to let fact. As at as a means of leverage before he with dries. But DeVon Mexico has seen many threats from this president so far many of which have never come to fruition. So it sounds like they're trying to take this optimistic approach trying to take a friendly diplomatic. I stance to try to dial down the temper. Attorneys logs will be closely watching the the body language tomorrow but good point as you said the president won't be here he's the ultimate. Our murder on this turf sure sounded like they are going to going to affect at least to start next week how Parma allow. You were just saying that this could add up to be the biggest tax increase in quite some time this could help us. Break that down what would that mean for people and I thought we all just got a big tax cut but the president tactics president's GOP tax law. Yet as it is also an important thing to understand so we. In Washington just passed a very large tax cut about one point five trillion dollars over the next decade. Called the tax cuts in jobs act to cut taxes for taxpayers of all all income levels. Now if you compare that to the terrorists. It's actually some pretty bad news for the trump administration they like to brag about how they. Put forth a big middle class tax cut. But once you. Put the tax cuts in jobs act next to the tariffs. That's no longer true you're actually under the trump administration here all these tariffs for to go into effect. Middle class would end up paying a higher tax liability than they did before trump even entered office. Mouth so that that it's just the small tariff on Mexico which is being threatened and that of course the tariffs and China and some of our other our trading partners are are adding up as the prices. Are occurring increased by a lot of these suppliers. Nick how Carmelo right attend I think he's so much for your analysis at the Tax Foundation the chief economist there appreciate you in Jordan Phelps or White House reporter over in London thank you Jordan for that.

This transcript has been automatically generated and may not be 100% accurate.

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