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.
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
