U.S. would be hurt by its own bor­der tax: study

The Hamilton Spectator - - BUSINESS -

A pro­posed U.S. bor­der-ad­just­ment tax that has stirred up fears in cor­po­rate Canada would in­flict con­sid­er­able dam­age on both economies, a new re­port says.

The study was re­leased Tues­day, a day af­ter Prime Min­is­ter Justin Trudeau met Pres­i­dent Don­ald Trump and top House law­maker Paul Ryan, who has pro­moted the bor­der-tax mea­sure. The anal­y­sis by the C.D. Howe In­sti­tute think tank es­ti­mated the pol­icy change would shave nearly a full per­cent­age point from Canada’s eco­nomic growth. The study’s au­thors said the plan would re­duce bilateral trade in both di­rec­tions and pre­dicted it would cut nearly 1.3 per­cent­age points from U.S. eco­nomic growth.

“It is trade-dis­tort­ing and eco­nom­i­cally dam­ag­ing to the United States and its trad­ing part­ners,” co-au­thors Dan Ci­uriak and Jingliang Xiao wrote about the bor­der-tax pro­posal.

“Canada is heav­ily ex­posed to the ram­i­fi­ca­tions of a (bor­der-ad­just­ment tax).”

It’s un­clear whether Trudeau was able to get some clar­ity — or re­as­sur­ance — from Ryan on the fu­ture of the bor­der tax, which has Cana­dian firms deeply con­cerned.

Asked whether Trudeau learned more about the bor­der­tax pro­posal, a spokesper­son in his of­fice pointed to a state­ment that only said the prime min­is­ter dis­cussed trade dur­ing his meet­ing with Ryan.

For­eign Af­fairs Min­is­ter Chrys­tia Free­land said Tues­day that the meet­ings in Wash­ing­ton con­firmed her ex­pec­ta­tions: the fate of the bor­der-tax plan was un­cer­tain.

“This is very much in the early stages, and there is a very broad di­ver­sity of opin­ion in the United States around that,” Free­land told re­porters in Ot­tawa.

“It’s not ap­pro­pri­ate for us to have a po­si­tion on that un­til we see where the U.S. lands.”

She noted that the bor­der-tax mea­sure is part of a broader taxre­form plan.

Free­land also said talks sur­round­ing the rene­go­ti­a­tion of the North Amer­i­can Free Trade Agree­ment had yet to be­gin be­cause ap­pointees for the new U.S. sec­re­tary of com­merce and trade rep­re­sen­ta­tive po­si­tions still had to be con­firmed.

This is very much in the early stages, and there is a very broad di­ver­sity of opin­ion in the United States around that. CHRYS­TIA FREE­LAND

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