During a brief news conference he held at Mar-a-Lago on Friday afternoon, President Donald Trump claimed that closing the border with Mexico would be a “profit-making operation” because of the United States’ trade deficit with its southern neighbor.
Trump’s latest comments about the border indicate he doesn’t understand how trade works
It’s supposedly his signature issue!
“I’ll just close the border, and with a deficit like we have with Mexico and have had for many years, closing the border will be a profit-making operation,” Trump said, after he announced the departure of Small Business Administrator Linda McMahon, which was the press conference’s main purpose.
But that is not at all how trade works.
As Vox’s Dara Lind explained in a piece about the threats Trump made on Twitter earlier Friday to close the border “[i]f Mexico doesn’t immediately stop ALL immigration coming into the United States through our southern border,” closing the border would disrupt supply chains and import/export flows, causing an economic catastrophe:
Shutting down ports of entry would be an economic disaster. It would also disrupt the lives of border communities that rely on the flow of people between the US and Mexico — including the major cities of San Diego (and Tijuana) and El Paso (and Ciudad Juarez).
Approximately $1.5 billion worth of commerce happens along the US-Mexico border every day. Nearly half a million people cross the border legally every day through Texas ports alone.
Even reductions in port capacity or temporary shutdowns tend to lead to panic among the business community and local residents. El Paso is currently concerned that already-long waits at the ports could get longer as agents are reassigned to care for unauthorized migrants. When the San Ysidro port of entry in San Diego shut down for a few hours in November, as agents responded with force (including tear gas) to an organized march of asylum seekers, the temporary closure cost about $5.3 million in lost business revenue.
According to the Office of the US Trade Representative, Mexico is the US’s third-largest trading partner, with the total goods and services trade amounting to over $615 billion in 2017. While the US’s overall deficit with Mexico was $63.6 billion that year, an estimated 1.2 million American jobs are based on US-Mexico trade.
Even short border closures have significant negative consequences. When the San Ysidro Port of Entry in San Diego was closed for five hours last November following an ill-fated march on the Mexican side, the San Ysidro Chamber of Commerce estimated it cost American businesses about $5.3 million.
Trump may believe American jobs are better guarded through protectionist trade policies —trade protectionism is one of Trump’s signature issues — but he has a long history of either misunderstanding how those policies actually impact the US economy or of making wildly false statements about trade deficits. He’s repeatedly spread inaccurate figures about US deficits and demonstrated ignorance about the fact that deficits are calculated based on both goods and services, not just goods.
Trump has tried to bring down deficits by imposing tariffs on imported goods, but he doesn’t seem to understand that tariffs are really taxes on US importers, not foreign governments. And the latest figures indicate that not only are Trump’s trade wars not shrinking deficits, but they’re actually doing the opposite: The US trade deficit of $891.3 billion in 2018 was the highest in history.
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