Back in March of 2016, we suggested that a Trump administration could repeal NAFTA and claim that Mexico was paying for the wall via higher tariffs. A static back-of-envelope calculation implied that the U.S. would receive about $2 billion a year in additional revenue. Cutting that in half to account for falling trade volumes would give you about a billion. Thirty-year treasuries are currently yielding about 2.875%, so that billion-dollar revenue stream could plausibly be said to allow for $19.9 billion in borrowing to finance the wall, currently estimated to cost about $18 billion.
In reality, repealing NAFTA would not pay for the wall for two reasons. First, the economic dislocations would almost certainly reduce other tax revenues. Second, much (most?) of those tariffs would fall on American consumers more than Mexican producers. Third, inasmuch as Mexican producers will pay, many of those producers are American owned. Add that up, and repealing NAFTA will cost rather more than the additional tariff revenue.
But you could, in a static sense, claim that repealing NAFTA would pay for the wall.
And now, in a fairly incoherent interview for the Wall Street Journal, the President has now jumped on the “logic” we laid out last March. “[Mexico] can pay for [the wall] indirectly through NAFTA. We make a good deal on NAFTA, and, say, I’m going to take a small percentage of that money and it’s going toward the wall. Guess what? Mexico’s paying.”
The obvious read is that he intends to bring back tariffs on U.S.-Mexico trade (the small percentage) and will use that revenue to pay for the wall. If there was any consistency to this White House at all, I would take that as the death knell for the trade agreement.
But who knows what the President meant? Does he even know what he meant?