Unless you have really been going out of your way to avoid any coverage of the current election season, you’ve heard Donald Trump make the following claims:
1) If he is elected, a wall will be erected between the U.S. and Mexico
2) Mexico will pay for it
How can he be so sure? The main fact he leans on is the trade deficit. In short, Mexico sells more to us than we do to them. His theory is that they will pay to build a wall so they can keep selling us stuff. I say, “uhhh no.”
Every week I buy our groceries at a local chain that is cheaper than any of the other grocery stores. I don’t know how, but just about everything is 5-25% cheaper there. People assume I have some elaborate money-saving schemes. I don’t. I just do 95% of our grocery shopping at this one store. This store and I, we have a trade deficit. They sell more to me than I do to them. With that power, I should be able to get them to build me my own shopping cart, or print me some custom paper bags, right? They will definitely meet my demands because of the deficit, right?
No. I need them as a source of cheap goods as much (if not more) than they need me to keep buying their stuff. We may buy more from Mexico than they do from us. That doesn’t mean they need us more than we need them. We need their cheap goods, cheap labor, cheap natural resource exports. So, unless you’re in California, you can pretty much thank Mexico for that deliciously-affordable avocado you just ate. If we suddenly stop buying from Mexico, guess what? Mexicans are smart folks. They will find other countries who want to buy what they have to sell, perhaps at higher rates. And when we come groveling back? Guess who’s not grandfathered into $1 avocados.
Still not convinced? Consider this: Mexico existed, survived, and thrived long before us. The United States is not the reason for Mexico’s existence or success, it’s the other way around — Mexico is a huge part of the reason the United States exists.