Less than a week into office, US President Donald Trump has substantially soured relations with southern neighbour Mexico, threatening the beginnings of a trade war. Trump has voiced his support for the introduction of an import tariff on goods from Mexico, with the money generated used to fund the construction of the infamous wall promised during his presidential campaign. His statements have been interpreted as support for a current proposal from House Republicans for a 20 percent tax on all goods imported to the US.

While the intention of the tariff is to force the cost onto Mexico and its industry, the bulk of the tax would likely be passed on to US consumers

As reported by The New York Times, Trump’s apparent support for this import tax came following a diplomatic standoff with Mexico’s president Peña Nieto, who cancelled a visit to Washington over Trump’s insistence Mexico would pay for the construction of the wall. However, Trump’s commitment to the tax has since been rolled back, with White House Press Secretary Sean Spicer telling reporters an import tax was just one of several options being considered. The tax plan being proposed would need congressional approval to be implemented.

While the intention of the tariff is to force the cost of the wall on to Mexico and its industry, the bulk of the tax would likely be passed on to US consumers. As reported by The Guardian, Mexican Foreign Minister Luis Videgaray cautioned a tax in this format would punish the US people: “A tax on Mexican imports to the United States is not a way to make Mexico pay for the wall, but a way to make the North American consumer pay for it through more expensive avocados, washing machines, televisions.”

Additionally, should goods from Mexico become too expensive, US consumers and retailers would likely turn to other countries, thus limiting the funds that could be generated from the tax.

Despite the questions surrounding how it would be funded, the wall is going ahead; with Trump already signing an executive order issuing its construction. Trump has stated the wall will cost between $10bn and $12bn, although some independent estimates have placed the cost at closer to $25bn.