by Mish

President Donald Trump said Monday the U.S. will impose a “very major” border tax on companies that move some operations overseas and signed a memorandum withdrawing the U.S. from the Trans-Pacific Partnership, as he sharpens his focus on recasting America’s international trade relations.

“We’ve been talking about this for a long time,” Mr. Trump said as he signed the order removing the U.S. from the trade pact with 11 other nations. He said the move will be a “great thing for the American worker.”

Before withdrawing from TPP, Mr. Trump met with business leaders at the White House and asked them to devise a plan to boost U.S. manufacturing.
Regulations, he said, have “gotten out of control,” and while he described himself as a friend of the environment, he said “some of that stuff makes it impossible to get anything done.”

“There will be no country that’s going to be faster, better, more fair,” Mr. Trump said.
He promised incentives for businesses that produce and hire in the U.S. but warned the leaders, “if you go to another country…we are going to be imposing a very major border tax.”

“We don’t have free trade because we’re the only one that makes it easy to come into the country,” Mr. Trump said.
Among the CEOs in attendance were the leaders of Ford Motor Co., Lockheed Martin Corp., Under Armour Inc., and Whirlpool Corp., according to the companies, as well as Michael Dell and Tesla Motors Inc. Chief Executive Elon Musk.

RECOMMENDED ARTICLES

Dow Chemical Co. Chief Executive Officer Andrew Liveris said after the meeting that Mr. Trump asked them to come back to him within 30 days with specific ideas to boost U.S. manufacturing. He said Mr. Trump had to take a phone call halfway through the meeting but then invited the 12 chief executives to join him and continue their conversation in the Oval Office.
Mr. Liveris said the executives discussed at length with Mr. Trump his proposal to set up a tax on U.S. companies that manufacture goods in other countries and then import them back into the U.S.

“We did talk about the border tax quite a bit, and we did talk about the sorts of industries that could be helped or hurt by that,” Mr. Liveris said. “I would take the president at his word here. He’s not going to do anything to harm competitiveness.”
Mr. Trump has described his “border tax” in the past as a selective 35% tax on companies that outsource production to other countries and then import goods back to the U.S. That is different from the “border adjustment” that is a key feature of the House Republicans’ tax plan. Mr. Trump has criticized that idea, which would tax all imports and exempt exports from U.S. business taxation.

Border Tax vs. Border Adjustment

Apparently a “border tax” is selective punishment but a “border adjustment” isn’t.

“Anytime I hear border adjustment, I don’t love it because usually it means we’re going to get adjusted into a bad deal. That’s what happens.”

Trade Hardball

Ryan used the words “border adjustment” because border taxes are against WTO rules. Does selective enforcement make them WTO-compatible?

Color me skeptical. Does Trump care? Clearly not. It may take years before any WTO complaints get heard.

For further discussion on WTO violations and why border taxes are a bad idea, please see Untangling Trump’s Incompatible Goals on the US Dollar, Tariffs, China, Republican Tax Plan.

My position: Trump’s tariffs may save a few thousand manufacturing jobs in the short run, but the net effect will be a huge loss of jobs in the long run.

Mike “Mish” Shedlock

Untangling Trump’s Incompatible Goals on the US Dollar, Tariffs, China, Republican Tax Plan

Donald Trump described the dollar as “too strong” and the yuan as too low. He also went after House Speaker Paul Ryan’s tax plan as “too complicated”.

Tariffs: A Poor Predictor of Trade Surplus or Deficit Flows

President Trump believes in bilateral trade negotiations, with tariffs, if necessary, to cure alleged imbalances. House speak Paul Ryan is on board with a Border Adjustment Tax (BAT) proposal.

“Junkie’s Dilemma” Trade Wars with China Start Monday: Major Economic Shock Possible

President Donald Trump is ready to launch a new trade crackdown on China next week according to a Trump administration official.

Killing the Trade Golden Goose: Farmers Rattled by Trump’s NAFTA Rescinding Plans

It’s fair to presume NAFTA is not the sole cause of the increase in trade, but it is also fair to presume that NAFTA helped.

Trump Hardball: Europe Pressured to Cancel Russia Pipeline to Avoid Trade War

Trump is pressuring Germany to cancel a natural gas pipeline deal with Russia. There are signs Merkel may cave in.

Trump Considers Executive Order Withdrawing From NAFTA: Majorly Stupid

“It’s been very, very bad for our companies and for our workers, and we’re going to make some very big changes or we are going to get rid of NAFTA once and for all,” President Donald Trump said in a speech last week.

Trump Promises Steel Action: Expect Job Losses

The steel industry and steel stocks both cheer today’s news that Trump will take action against Chinese steel dumping.

Trump Releases Tax Package Outline With Many Loose Ends

President Donald Trump will propose the largest tax cut in the country’s history as a way to spark sustained 3% economic growth, U.S. Treasury Secretary Steven Mnuchin said Wednesday.

Tax Overhaul: Where Art Thou? Republican Divisions Widening, Mish Suggestion

Trump has promised a sweeping overhaul of the US tax code to protect US exporters.