So unpredictable is the Trump administration that even the guy who follows Washington for thousands of auto dealers isn’t ready to venture a guess on whether an import tax will show up in the president’s tax reform plan.
“I can’t begin to read the tea leaves of what this administration is going to do with one thing or another,” said Cody Lusk, president of the American International Automobile Dealers Association, which represents dealers of foreign brands.
But if the so-called border adjustment tax, or BAT, does make an appearance, it could very well divide Congress the same way the failed replacement for Obamacare did.
On Thursday, Trump took a shot at the group of conservative Republicans who helped scuttle the health care plan in the House of Representatives. “The Freedom Caucus will hurt the entire Republican agenda if they don’t get on the team, & fast,” he wrote on Twitter.
That sounded like a pre-emptive strike for the coming clash over tax reform.
The border adjustment tax is not primarily a trade measure, but a fiscal one, designed to recoup the lost revenue from other proposed tax cuts in a way that favors exporters over importers.
“Members of the Freedom Caucus aren’t excited about cutting taxes on the one hand but paying for it with a brand-new tax on the other hand,” Lusk said.
“Some moderates might not be accepting of what they view as a regressive tax on middle-class consumers,” he added. “So a lot of the same factors that came to play out on health care are going also to be playing a key role in the tax reform debate.”
The main proponent of the BAT is House Speaker Paul Ryan, who authored the health care bill that drew little love in the House and less in the Senate, even among Republicans.
So Trump may be a bit wary of another outing with Ryan and his unorthodox economic ideas.
“No one knows where the Trump team on this is, although we do get varying reports,” Lusk said. “But every day that goes by, a new senator seems to come out in opposition” to a BAT.
The AIADA is part of a coalition that calls itself Americans for Affordable Products and includes retailers that would be hit hardest by the tax. Wal-Mart, Toyota Motor North America and the Michigan Retailers Association are among the hundreds of coalition members.
Lusk argues that the import tax, which also affects American-made products that have imported content, would raise the average price of a car by a couple thousand dollars.
BAT proponents say the value of the U.S. dollar would rise against other currencies by the same amount of the import tax, canceling out its negative effects.
With automakers and dealers facing a plateau in new-vehicle sales, Lusk said it’s not a good time for the government to embark on a risky tax experiment in the name of reform -- not even for the domestic brands, since their vehicles also have plenty of foreign content that would be subject to the tax.
“I think when you talk to the dealers, they understand the implication that all prices are going to go up,” he said.