You have no idea how this works. Mexico would have to pay US to sell their goods here. Raising their prices would result in them paying a HIGHER tax. People would stop buying their products which would result in them losing even more money.
Let's walk through this bit by bit:
Firm X in a foreign country sells its products here. They charge the retailer $1.
Retailer Y sells you the product. They mark it up to, let's say, $2, which covers their costs and allows for some profit.
Congress passes an import tax of 25%. Now Firm X sells the product for $1 but pays the government $0.25 for the privilege. Their revenue has declined by 25%.
Firm X now has a choice to do some combination of these things:
1. Charge Retailer Y more for the product (to still see $1 of revenue they actually need to charge $1.33, not $1.25, since any price increase is also subject to the tax).
2. Suffer a loss of revenue. They may be able to eat the entire tax out of their profit margin, I don't have the data in this hypothetical. They may have to eat some of it to remain competitive.
3. Stop selling their products here. We aren't the only market in the world. If the quality is competitive- and after all, we were buying it - perhaps they can sell somewhere else for the same profit or more.
It is obvious that option one passes the actual payment of the tax on to either Retailer Y or their customers and that option three results in no tax being paid by anyone. Thus any tax revenue actually coming from the foreign country depends on Firm X's ability and willingness to lose a significant amount of revenue from each sale. It also depends on the rate being low enough to preserve foreign interest in selling here at all (that is, don't kill the golden goose).
In this scenario, if comparable domestic goods wholesale for more than $1.33, X can probably get away with passing the entire cost on to us (the evidence is overwhelming that the market considers price to be the most important variable in a purchasing decision).
Yeah, they're more than welcome to keep raising their prices. The result is that they'll pay an even higher tax. What are they going to do, keep raising their prices? Nobody will pay for their product.
They're free to sell their product elsewhere. Guess who's closest? AMERICA. Hence, choosing to sell their products to other countries that they would've sold to us results in higher shipping costs for them.
The bottom line is, if they refuse to pay for the wall and Trump hits them with this tax, they're going to have to eat the costs. Trump has the by the balls. There's a reason he's a billionaire.
Won't they just sell their goods at other places? Mexico doesn't just sell to the US. I'm sure shipping to other nearby countries in central and south america is less then a 25% tax. I'm not saying they'll stop selling to the US, but they'll definitely be shifting away from it as long as they have an excessive tax on them.
@PORKINS actually Mexico is where US get most of their fruits and vegetables. Pineapples, bananas, avacados, I think maybe tomatoes, guava, papayas, ect...
@BlackATTACK you're just a stupid idiot internet troll who wants to get people mad. You have a sad miserable life and you want other people to suffer with you and you also want power over other people because you don't have any power over your own miserable life.
Re-caption this meme
He especially has a chubby for me.
*takes deep breath..savors the power and influence I hold over "Lil Renny Ren"*
http://www.businessinsider.com/sean-spicer-trump-considering-20-tax-on-mexican-imports-2017-1
http://www.cnn.com/2017/01/26/politics/donald-trump-mexico-import-tax-border-wall/index.html
Firm X in a foreign country sells its products here. They charge the retailer $1.
Retailer Y sells you the product. They mark it up to, let's say, $2, which covers their costs and allows for some profit.
Congress passes an import tax of 25%. Now Firm X sells the product for $1 but pays the government $0.25 for the privilege. Their revenue has declined by 25%.
Firm X now has a choice to do some combination of these things:
1. Charge Retailer Y more for the product (to still see $1 of revenue they actually need to charge $1.33, not $1.25, since any price increase is also subject to the tax).
2. Suffer a loss of revenue. They may be able to eat the entire tax out of their profit margin, I don't have the data in this hypothetical. They may have to eat some of it to remain competitive.
3. Stop selling their products here. We aren't the only market in the world. If the quality is competitive- and after all, we were buying it - perhaps they can sell somewhere else for the same profit or more.
It is obvious that option one passes the actual payment of the tax on to either Retailer Y or their customers and that option three results in no tax being paid by anyone. Thus any tax revenue actually coming from the foreign country depends on Firm X's ability and willingness to lose a significant amount of revenue from each sale. It also depends on the rate being low enough to preserve foreign interest in selling here at all (that is, don't kill the golden goose).
In this scenario, if comparable domestic goods wholesale for more than $1.33, X can probably get away with passing the entire cost on to us (the evidence is overwhelming that the market considers price to be the most important variable in a purchasing decision).
They're free to sell their product elsewhere. Guess who's closest? AMERICA. Hence, choosing to sell their products to other countries that they would've sold to us results in higher shipping costs for them.
The bottom line is, if they refuse to pay for the wall and Trump hits them with this tax, they're going to have to eat the costs. Trump has the by the balls. There's a reason he's a billionaire.
So there :p
I see what you are getting at.
imgflip.com/i/1ikgy2