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Trump suggests large tax on Mexican imports to pay for border wall

The Trump administration announced Thursday it intended to implement a 20 percent tax on Mexican imports to pay for a coming border wall. An official appeared to walk back the statement later that afternoon.

Now-President Donald Trump is shown on Jan. 28, 2016, speaking to a group of veterans at Drake University during the 2016 Republican presidential campaign.

Editor's note: This story has been updated throughout.

The Trump administration sparked widespread surprise Thursday by announcing it intended to implement a 20 percent tax on Mexican imports to pay for a coming border wall — followed by extreme confusion when it appeared to walk back the statement later that afternoon.

White House Press Secretary Sean Spicer made the initial announcement Thursday afternoon aboard Air Force One, as President Trump returned from a meeting with House Republicans in Philadelphia.

"Right now, our country's policy is to tax exports and let imports flow freely in, which is ridiculous," he told reporters. "By [imposing the tax], we can do $10 billion a year and easily pay for the wall just through that mechanism alone. That's really going to provide the funding." 

Spicer further indicated that the administration has "been in close contact with both houses" of Congress. 

"It clearly provides the funding, and does so in a way that the American taxpayer is wholly respected," he added. 

Later on Thursday, however, White House officials sought to characterize the tariff as one of several options to fund the wall, according to multiple news reports

If passed by Congress, such a move is all but certain to have a dramatic affect on the U.S. economy and particularly in Texas, which imports far more from Mexico than from any other country, according to U.S. Census data.

The top two busiest inland ports in the country are the Laredo and El Paso customs districts, both located near the border. From January to November of 2016, the Laredo customs districts did more than $250 billion in two-way trade with Mexico, according to WorldCity, a Florida-based economics think tank that uses U.S. Census data to track trade patterns.

The El Paso customs district was a distant second but still saw about $86.9 billion in two-way trade.

This image, from a 2016 Texas Department of Transportation report, shows tractor-trailer traffic from Laredo across the United States during a one-week period.TxDOT

During the same time frame, goods imported from Mexico through all U.S. ports totaled more than $270 billion. The top three imports were vehicles, vehicle parts and computers.

U.S. Rep. Filemon Vela, D-Brownsville, said the proposal is one more knee-jerk reaction that would ultimately harm American consumers.

“This is just another stupid thing [from Trump],” he said. “The thing about an import tax is that there are so many products on American shelves that come from Mexico that whoever is selling those products is just going to pass that cost on to the American consumer.” 

As news of Trump's proposal spread Thursday afternoon, Senate Majority Whip John Cornyn of Texas tweeted, "Many unanswered questions about proposed 'border adjustment' tax."

Yet Lt. Gov. Dan Patrick called the proposed tax "just the first foray" when it comes to paying for the wall.

"Consumers could pay that, but I don’t think that’s what it’s going to come down to," Patrick said in an appearance on Fox News. "I think this is the first shot across the bow. "

"Donald is not going to ... ever be on defense," Patrick added. "You didn’t see him on defense throughout the entire campaign. He’ll always be on offense, and that’s how you get the best deal.”

After Spicer walked back his original statement, Patrick cast even more doubt on he import tax, telling WOAI radio in San Antonio, "I don't think he's going to put a 20 percent tariff on it."

U.S. Rep. Robert "Beto" O'Rourke, D- El Paso, argued that just the threat of a tariff hike could have devastating effects on the border and beyond.

"Even the suggestion that he may do something like this is going to hurt the ability to attract investment and keep investments in communities like El Paso and Laredo," he said. "Or those jobs that are connected to U.S-Mexico trade that are in other parts of Texas, whether they are in Dallas, Houston Austin, Lubbock or elsewhere."

State business leaders also were wary of the import tax. In a Thursday evening statement, Texas Association of Business President Chris Wallace said the proposal "could mean a loss of jobs and a hit to state tax revenues."

"I would encourage our state leaders to make the economic ramifications of this proposal known," the statement read.

Trump repeatedly promised during his 2016 presidential campaign that he would build a wall on the Mexican border and he would force Mexico to pay for its construction. 

Many political and economic observers at the time suggested that such a plan was unenforceable, and the import tax announcement came on a day of escalating tensions between the neighboring countries.

Early Thursday morning, Trump warned Mexican President Enrique Peña Nieto to pay for the wall or not attend a coming meeting between the two men. 

Peña Nieto did just that, canceling the meeting.

Vela said the Mexican president's change of heart shouldn't come as a surprise to the White House.

"What the hell does Donald Trump expect? When you treat an ally with such disrespect, how do you expect them to even deal with you?" Vela said.  

Patrick Svitek contributed to this report.

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