How plan to pay for Mexico wall would work

President Donald Trump is promising Mexico will pay for his massive border wall and on Thursday his administration finally suggested how: a 20 per cent tax on products imported from south of the border.

The new measure could be part of a comprehensive tax reform package that Trump and Congress will work out but there's great ambiguity about the proposal.

TAX, A TARIFF OR SOMETHING ELSE?

The White House said the tax overhaul would place a 20 per cent tax on imports from any country enjoying a trade surplus with the US.

The idea is to rebalance the playing field for US companies by discouraging Americans from importing.

The new revenues are projected to top $US1 ($A1.3) trillion over a decade.

WHAT DOES THIS MEAN FOR AMERICANS?

Mexican products would become more expensive - cars, eyeglasses and many basic groceries.

Importers, including big retailers and consumer electronics firms, say the higher prices for Mexican products could hurt sales, and American jobs.

WOULD MEXICO REALLY BE PAYING?

The US could recoup some of the wall's costs by changing the tax and trade policies with Mexico.

But the money wouldn't necessarily be coming from Mexican taxpayers or the Mexican government.

The costs would likely be passed on to consumers and that leaves Americans footing much of the likely bill.

WOULD IT RAISE ENOUGH MONEY TO PAY FOR THE WALL?

Probably.

Various estimates put the wall's cost at up to $US15 billion ($A20 billion).

House Republicans expect their plan to pull in much more than that in its first year. They say that could easily cover the costs of the wall.

IS IT LEGAL?

To be determined.

The US has a range of obligations under the North American Free Trade Agreement and at the World Trade Organisation.

And Mexico is likely to challenge any new tax that penalizes its economy.

HOW WOULD THIS AFFECT THE ECONOMY?

The White House said the plan would increase US wages, help US businesses and consumers, and deliver "huge economic benefits"."

But with so much of the plan ill-defined, it's impossible to substantiate those claims.

Any turbulence in the US-Mexican trade relationship could have implications for the entire world.