Auto industry ready to fight GOP’s border tax
NADA says it could pose ‘serious threat to vehicle affordability’
The automotive industry is making it clear that it is strongly opposed to the so-called border adjustment tax, saying it would raise the cost of cars and hurt both the industry and customers.
As proposed by U.S. House Speaker Paul Ryan and other Republicans, a border adjustment tax would give tax breaks to American companies that ship products to other countries. At the same time, it would remove tax breaks for American companies that import goods from other countries. But there is not Republican unity on the issue: As reported Monday, Treasury Secretary Steven Mnuchin told the
Financial Times that the proposed tax is unlikely to survive.
That would be good news for lobbyists and other representatives of the auto industry. While praising the “pro-business” policies favored by the Trump administration, they have been making sure the administration and Congress know it is strongly opposed to a tax on imports.
“Tax reform should not be financed by an increase in border taxes and goods, taxes that will drive up the prices of trucks and cars sold in the USA,” Mark Scarpelli, chairman of the National Automobile Dealers Association, said at the 2017 Automotive Forum last week. “That is not a good equation.”
Scarpelli urged dealers to talk to lawmakers to oppose the idea even though no specific legislation has been introduced.
“We need to make sure that Washington fully understands the potential for this tax to pose a serious threat to vehicle afforda- bility,” Scarpelli said.
Scarpelli wasn’t alone. The leaders of two lobbying groups, a highly-ranking Wall Street analyst and a top industry executive also warned that a border adjustment tax would cause the cost of new cars and trucks to increase by as much as $3,000 and could cause U.S. auto sales to drop by as much as 2 million units per year.
Some in the automotive industry have begun to believe that the border adjustment tax has already lost substantial support and is never going to make it through Congress. Trump appears to now be following a more business-friendly agenda, driven by the influence of his son-in-law Jared Kushner, and is moving away from a nationalist agenda driven by Steve Bannon, his chief strategist.
But John Bozzella, CEO of Global Automakers, another automotive lobbying group, said it’s dangerous for the industry to become complacent.
“I come from the school of politics that it’s never dead until it’s actually dead,” Bozzella said. “Look, this is a proposal that raises taxes to cut taxes. And it raises taxes on every single car that every single dealer in this room sells.
“This raising taxes to lower taxes just should not be done.”
Trump hasn’t specifically endorsed the border adjustment tax but has talked frequently about imposing a 20% or 30% tariff on goods from Mexico — an idea that is different than the more comprehensive border adjustment tax.
On Wednesday Trump said he doesn’t like the term but does like a similar idea.
“I don’t like the word ‘adjustment,’ because our country gets taken advantage of, to use a nice term, by every other country in the world,” Trump told Fox Business News. “Adjustment means we lose. We lose.”
“Let’s call it an import tax. Let’s call it a reciprocal tax,” he added. “Nobody gets angry when you say reciprocal tax.”
Trump made “America first” and manufacturing jobs a centerpiece of his presidential campaign. Since he was elected, Trump has met multiple times with the CEOs in the automotive industry.
The United Auto Workers union has even found itself in alignment with Trump’s desire to overhaul the North American Free Trade Agreement and has said it is considering a “Buy American” automotive campaign.
“We think that’s intriguing. And part of it is because we are a big exporter,” Ford CEO Mark Fields said at the New York International Auto Show.
In 2016, 80% of the vehicles Ford sold in the U.S. were made in the U.S. while 13% were made in Mexico and 7% were made in Canada.
“(The proposal) raises taxes on every single car that every single dealer in this room sells. This raising taxes to lower taxes just should not be done.” John Bozzella, CEO of Global Automakers