Courtesy of Mish.
An Import Levy is on its way according to US tax policy chief Kevin Brady.
I firmly believe such tariffs will destroy jobs in the US and Globally, but my opinion does not matter. Others will soon be yelling as well.
“I do expect China and Europe and Mexico to yell about this,” says Kevin Brady.
Kevin Brady, the chief tax policymaker on Capitol Hill, launched a robust defence of his proposal to tax imports and sought to tie it to President Donald Trump’s “America first” economic agenda just as the new president appears to waver on the idea.
The plan to penalise importers and incentivise American exports has emerged as the most contentious part of the biggest proposed overhaul of the tax code in 30 years, a process that begins in Mr Brady’s Ways and Means committee in the House of Representatives.
“I do expect China and Europe and Mexico to yell about this,” Mr Brady said. “They have a tax advantage built in because America voluntarily gives them and their products a significant tax advantage over ours here in the United States and gives them a tax advantage in their own country as well. That unbalanced approach will not continue.”
Today foreign competitors “adjust” their taxes at their borders by adding taxes to American-made products and taking taxes off their own, he said, but the US did not.
By killing that “completely backwards” feature — which he would do by not letting US companies deduct import costs from their taxable income — Mr Brady said he would eliminate the price advantages of Chinese steel, Mexican cars and foreign oil.
But he faces a fierce battle over his plans. Big importers including retailers, apparel makers and the billionaire Koch brothers have united against the proposal, arguing it would cripple businesses that cannot source their products in the US and force them to raise prices for consumers.
This month Mr Trump called Mr Brady’s idea “too complicated”, telling the Wall Street Journal: “Anytime I hear border adjustment, I don’t love it.”
But he backtracked soon afterwards, telling the Axios news service that the report did not accurately reflect his views and that the border tax adjustment was “certainly something that is going to be discussed” in White House negotiations with congressional Republicans.
Not WTO Compliant
For starters Brady’s plan is not WTO compliant. Brady, Trump, and Paul Ryan likely know that.
However, given that WTO complaints take years to settle, the trio can pretend for years that the plan is WTO compliant.
Then, assuming it does get that far, the US can simply ignore the WTO. However, if this legislation passes, it is pretty naive to believe other nations will not act similarly.
Can Trump Win a Trade War?
