PROPOSED BORDER TAX COULD BE DISASTROUS FOR CANADIAN BUSINESSES.
‘Negative’ impact expected, study determines
•A border adjustment tax being tossed around by United States Republicans would be brutal for the Canadian economy, according to a forthcoming paper from the C. D. Howe Institute.
The study, to be released Tuesday, predicts the proposed tax package would be “highly distortionary and negative” and could cause Canada’s GDP to drop by almost a full percentage point.
Foreign Minister Chrystia Freeland told her U. S. counterpart Rex Tillerson on Wednesday that Canada would be “strongly opposed” to any new tariffs. But she said in a call with reporters that she would hold off on a position regarding the “bor- der adjustment tax” because it was still being shaped and debated.
The potential tax package being floated to U.S. Congress would replace 35- per- cent corporate income tax with a 20- to 25-per-cent “destination- based cash flow tax” that would tax imports while exempting American exports.
According to authors Dan Ciuriak and Jingliang Xiao, it’s a bad news story for Canada if the measures pass and incentives to buy Canadian go down, especially because the two countries have such intertwined supply chains. Ultimately, they believe bilateral trade would be reduced in both directions.
Canada’s real GDP could drop by almost a percentage point and Canadian prices could go down by about two percentage points, the study says. The worst-hit would include the auto industry, the energy sector ( specifically fossil fuels) and machinery and equipment.
Prime Minister Justin Trudeau is to have his first meeting with President Donald Trump on Monday in Washington.
The spectre of new tariffs isn’t the only issue Trudeau and Trump will have to talk about. Trump’s desire to renegotiate the North American Free Trade Agreement will loom heavy.
Although they differ on immigration and climatechange policy — among a long list of other things — the two leaders can likely find common ground on their shared support for the Keystone XL pipeline project, which would transport oil from Alberta to Texas.
As Trudeau told a crowd Thursday in Iqaluit, Nunavut, there will be “continued close integration on both sides of the border.”
PM VOWS ‘CONTINUED CLOSE INTEGRATION.’