Trump spokesman Sean Spicer said today that the president plans to make Mexico pay for the wall by following through on the House Republicans’ plan to make corporate taxes “border adjusted.” The proposed 20 percent tax would be imposed on imports, including imports from Mexico, but not on American exports. Since we import more from Mexico than we export to it, the U.S. Treasury should come out ahead from this shift. In itself, then, border adjustment is a tax increase on American consumers. Of course, Republicans intend to pair border adjustment with tax cuts that are at least as large as this tax increase.
While it is expected to raise revenue, border adjustment might not shrink the trade deficit. Economists generally expect it to cause the dollar to appreciate enough to leave the terms of trade unchanged–although how quickly that would happen is unknown.
It would have all kinds of other effects.
It certainly seems better than a tariff.