'I've Got A Friend Building A House In Cabo…'—Dave Ramsey Tries To Explain Trump's Tariffs, But People Say He's Out Of Touch (And Wrong)

Dave Ramsey, the popular personal finance guru, is facing criticism after a recent discussion about tariffs. During a segment of his show, Ramsey tried to explain President Donald Trump’s tariff policies by sharing a personal anecdote. “I’ve got a friend building a house in Cabo,” he said, using the story to argue that Mexico imposes heavy tariffs on U.S. goods.

Ramsey Claims Mexico Charges a 33% Tariff

The video starts out with Ramsey’s co-host, Ken Coleman, explaining that “tariffs will affect us. There’s no question. Even President Trump has said, and I quote, ‘Prices will go up.'” He continued, “There’s no question that that’s how tariffs work even though a tariff is placed on a foreign country. Tariffs are passed on from American companies to American consumers. It’s a long-held economic strategy. Sometimes it works, sometimes it doesn’t.” 

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Ramsey then claimed that Mexico slaps a 33% tariff on goods imported from the U.S., suggesting that tariffs are a common practice in international trade. His friend building a house in Cabo supposedly paid tariffs on “some of his appliances and his plumbing fixture shipped in from the States.” However, that’s highly questionable.

It’s possible that Ramsey confused Mexico's value-added tax with a tariff. Mexico imposes a 16% VAT on most goods, which applies to both businesses and individuals bringing products into the country. Additionally, luxury goods or specific items could be subject to extra taxes or duties, which may have been the case with his friend's appliances. Plus, if one is moving from the U.S. to Mexico and bringing personal belongings without a household goods certificate, import duties are 16% of the item’s declared value, in line with the VAT.

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However, this is not the same as a blanket 33% tariff on U.S. goods. The VAT is a consumption tax, similar to sales tax in the U.S., and is paid by the final buyer. Meanwhile, tariffs are charges imposed on foreign goods to protect domestic industries and under the United States-Mexico-Canada Agreement.

Mexico does impose tariffs on some products, but these usually apply to countries without a free trade agreement with Mexico, not to U.S. goods.

For instance, in August 2023, Mexico temporarily imposed a 25% tariff on various imports, including steel and textiles—but only for countries that don't have a free trade agreement with Mexico. Then, this past December, Mexico introduced a 35% tariff on specific finished textile products, again primarily affecting non-FTA nations. Also, any potential retaliatory tariffs in response to President Donald Trump's threatened tariffs on Canada and Mexico did not take effect. 

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Backlash From Viewers

Ramsey’s comments quickly drew criticism, with many accusing him of being out of touch. Under the video published on YouTube, critics pointed out that he seemed to misunderstand how tariffs work and how trade pacts like the USMCA.

As one user commented, “Talk about tone deaf. The average American is struggling with inflation and the best Dave can come up with is his friend building a house in Cabo?”

Another added, “This just proves that being good at personal finance doesn't mean you understand global economics.”

Other commenters questioned Ramsey’s claim about the 33% tariff, with one explaining, “An American company exporting goods (American goods under USMCA certification of origin guidelines) to either jurisdiction will not pay any duty (tariff) or have a reduced tariff, if any. However, an individual will not “evade” sales taxes that should apply to said goods. I looked at the Mexican Tariff (HS code), and I can’t find any tariff for appliances.”

Some also felt Ramsey was defending Trump's policies too strongly. One person wrote, “Dave sides with Trump on everything because Dave forgot where he came from! He used to be one of us.”

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Another pointed out, “Ken handled this well and tried to be objective in responding to the question. Dave’s answer revealed that he has been a little too rich for a little too long.”

One viral comment summed up the general sentiment: “When someone starts their argument with ‘I’ve got a friend building a house in Cabo,’ you can safely assume what he’s about to say doesn’t apply to your tax bracket lol.”

The Bigger Picture on Tariffs

Trump's tariff policies have been a hot topic, with supporters arguing they protect American industries and critics saying they result in higher costs for consumers. But regardless of where people stand on tariffs, getting basic facts right is important. Ramsey's mistake only added to the confusion around an already complex issue.

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