As President Donald Trump announced new tariffs on Mexico this week to force them to police their border more strongly against illegal immigration, one thing seems to be lost on those who support such a move. There is a negative, backwards effect that tariffs have in actually creating a situation where the US needs to increase (or at least maintain) illegal immigration to maintain revenues.
The problem arises when we use taxes to shape behavior. For example, when we increase taxes on cigarettes and alcohol in order to reduce consumption, we place the government in the awkward position of actually needing to encourage those behaviors to keep those taxes flowing. The government is now using those taxes as funding, and so in order to continue that use, the same levels of tax revenues need to increase with government spending on those funds that have already been budgeted. We now need to encourage people to smoke and drink so that we don’t have to look elsewhere to replace lost revenues due to a drop in tobacco and alcohol usage.
When we consider Trump’s use of tariffs in this situation, as revenues from tariffs on goods from Mexico decrease due to any reduced demand (even though that demand is minimal at best), the US government now needs to find a way to increase demand for those goods in order to make up for the shortfall on tax revenues. Or, maybe the government will need to find new taxes to make up the difference. They have now budgeted for those expenditures and depend on the revenues from those tariffs.
In addition to trying to find a way to maintain any revenues due to any reduction in demand, there is also a need to continue the revenues going forward. Because these new tariffs have been conditioned upon a reduction in the number of illegal immigrants coming through Mexico, in order to continue the tariffs, the US now needs to make sure the number of illegal immigrants does not meet the threshold to eliminate the tariffs. That, or the US needs to enact new taxes to make up for the lost revenues. Just because the taxes go away does not mean that they have not been budgeted into politicians’ pet projects.
So, now that Trump has implemented tariffs that depend upon illegal immigration, we are in the awkward position of needing to encourage illegal immigration to maintain tax revenues. Those aligned with Trump on this issue have now collectively shot themselves in the foot on illegal immigration. I suppose it could be possible that Trump intended these consequences, but it’s highly doubtful, given his past rhetoric on illegal immigration. It’s very odd to see so many on the right cheering on these tariffs that encourage the very thing they want to eliminate.
Many conservatives may be thinking that these tariffs will be gone when Mexico meets with Trump’s demands. However, can we trust that Trump will still be in office when the demands are finally met? Consider that the spendthrifts in Congress have never in their history found a way to gain a budget surplus. As the revenues from the tariffs come rolling in, they will be spent and the programs they cover will never go away, because even the conservatives will be afraid to eliminate them. History has proven it. The left will do whatever it can to encourage increased illegal immigration, and we will see very little, if any reduction.
Theses new tariffs will stay in place for a much longer time than anyone anticipates. All the time they are in place, they will continue to act to do the opposite of their stated purpose. The longer they are in place, the more entrenched the problems become.
Conservatives will be tempted to believe that it’s great if these tariffs stay in place, because they will believe that it’s creating more jobs in the US. However, protectionism has never really worked that way. Tariffs end up being a tax on the people they’re supposed to protect, and they end up eliminating more jobs than they create. But, that’s a discussion that’s longer than a single article can cover.
The main question I would ask supporters of tariffs used to penalize Mexico for illegal immigration is whether they actually desire to reduce it. I would ask any supporter of the tariffs to point out an example of any tax intended to modify behavior that has not resulted in the government becoming dependent upon that behavior for tax revenue. If the goal is to eliminate illegal immigration through Mexico, that’s not a realistic goal and can never happen. If the goal is to reduce illegal immigration through Mexico, then tariffs are just a way of encouraging that, since their existence is predicated on continued illegal immigration. Taxes used to modify behavior simply have not, nor will they ever, work. If you are seeking to reduce illegal immigration, do you really want to incentivize your government to be against you?