President Donald Trump has come up with a theory about how Mexico, by hook or by crook, really is paying for his border wall despite saying a thousand times no.
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TRUMP: "I often stated, 'One way or the other, Mexico is going to pay for the Wall.' This has never changed. Our new deal with Mexico (and Canada), the USMCA, is so much better than the old, very costly & anti-USA NAFTA deal, that just by the money we save, MEXICO IS PAYING FOR THE WALL!" — tweet Thursday.
THE FACTS: This is a face-saving statement to mask the fact that Mexico flatly refused to pay for a U.S. wall, Trump gave up trying to make it do so and U.S. taxpayers must foot the bill if the wall is to be built.
In essence, Trump is arguing that new terms of trade with Mexico will increase economic growth in the U.S. and produce more tax revenue. That's what everyone hopes trade agreements will do. As part of that, he hopes for a lower trade deficit with Mexico. Neither outcome is assured.
The deal negotiated with Mexico and Canada is an update of the North American Free Trade Agreement he has railed against, not a transformative pact. The three countries will continue trading in an environment of mainly low or no tariffs, with improvements here and there for all three partners. There is no credible way for Trump to forecast additional growth covering costs that are being charged to U.S. taxpayers if the wall is built. Trade balances depend on too many factors — consumer tastes, exchange rates, overall economic performance and the choices of thousands of companies among them — and some are well outside any government's control.
Trump specifically promised in the campaign that Mexico would pay for the wall. That is not the same as trying to reduce the U.S. trade deficit, which is about the exchange of goods and services among private entities rather than payments between governments. Nor is a trade deficit necessarily a penalty on consumers. It is the result of consumers buying things made in another country.
Trump wants some $25 billion from Congress for wall construction over five years and promises a partial government shutdown if he does not get a $5 billion or so portion in the next week. Congress may or may not give him that. If it does, it will not be because lawmakers expect a refund to the Treasury in future years from extra growth produced by a trade deal.
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