The Congressional Research Service issued a report (here) on the difference between an import tariff and a border tax, after some media reports used the terms interchangeably to describe late January statements by the Trump administration that it was considering imposing a 20 percent tax on imports from Mexico. The report notes that, while the Constitution assigns tariff authority “exclusively in Congress,” the legislative body “over time” has delegated authority to the president to modify tariffs by proclamation under certain circumstances. Congress has not, however, delegated its taxing authority to the president as it has, to some extent, for tariffs, and a border tax would likely be part of a larger domestic tax reform effort, according to the report. “Accordingly, it appears the President could not unilaterally impose a 20% tax on imports from Mexico,” the CRS said. A Republican source recently said Jan. 26 comments by White House Press Secretary Sean Spicer about Trump administration considerations of taxing Mexican imports to pay for a U.S. wall on the Mexican border are consistent with the House GOP’s border adjustment proposal (see 1701270040).
Senate Finance Committee Chairman Orrin Hatch, R-Utah, and House Ways and Means Chairman Kevin Brady, R-Texas, left with a positive impression following their Feb. 2 meeting on trade with President Donald Trump. Hatch in a statement (here) said Trump intends to advance a “strong trade agenda” for Americans, including ideas to “modernize” NAFTA. “Given that the trade pact is now more than two decades old, a re-examination of the agreement to ensure it remains the best possible deal for American workers and entrepreneurs in the 21st century global economy makes sense,” Hatch said. “Ultimately, major shifts in policy are decisions that should made with the consultation of Congress which, under the U.S. Constitution, has authority over tariffs." Brady called the meeting "very constructive and very thoughtful," emphasizing any updates to NAFTA should not just follow "free trade" doctrines, but also "fair trade" ideals. Brady added that attendees talked about trade collaboration between the executive and congressional branches, and he called it an "encouraging discussion." The meeting also included Senate Finance Committee ranking member Ron Wyden, D-Ore., and House Ways and Means Committee ranking member Richard Neal, D-Mass. Trump didn't specify how he would seek to change NAFTA through any renegotiation, but did signal that he wants to amend the deal, Wyden said in a statement.
The border adjustable “cash flow tax” proposed by Republicans in the House of Representatives has many important differences from the value-added tax (VAT) imposed by many countries around the world, Caroline Freund said during a Feb. 1 Peterson Institute for International Economics conference on the proposal (here). Unlike the uniform VAT, the “cash flow tax” hits companies differently, depending on how much they import, said Freund, a senior fellow at Peterson. Though the bottom line effects of the tax may eventually even out between importers and domestic manufacturers, the adjustment could be messy, she said. And World Trade Organization cases to challenge the tax could result in unprecedented amounts of retaliation, said Chad Brown, another Peterson senior fellow, also speaking at the event.
Despite the enthusiasm for a free trade agreement with the United Kingdom after it voted to leave the EU, a formal FTA between the U.S. and UK would be at least two years off, witnesses said during a Feb. 1 joint hearing of the House Foreign Affairs Trade and Europe subcommittees (here). While there are some differing estimates on the time frames, it's clear an FTA could only come after the UK formally exits the EU, a process expected to begin in March that will take a minimum of two years, according to Daniel Hamilton, executive director of the Center for Transatlantic Relations at the Johns Hopkins University School of Advanced International Studies. Hamilton said (here) there's much that could slow a deal with the US and a more likely estimate would be at least eight years. British Prime Minister Theresa May recently said the UK would start preliminary FTA discussions with the U.S. (see 1701270048).
The TV and display global supply chain is facing its “greatest political challenge with the presidency of Donald Trump,” a Display Supply Chain Consultants blog post said (here), predicting an uptick in “assembled in the USA” products. Calls for import tariffs on goods from Mexico and as much as a 45 percent import tax on goods from China “would profoundly disrupt the industry," DSCC President Bob O’Brien said. Some 95 percent of TV imports into the U.S. come from those two countries, he said.
Historical practice suggests that a full legislative repeal process could be necessary to change the current domestic implementation of NAFTA, should the Trump administration renegotiate the statutorily binding elements of the deal, according to a Congressional Research Service “legal sidebar” (here). The paper seeks to shed light on the issue of whether the president has exclusive authority to domestically implement legal changes pursuant to any NAFTA amendments between parties, as authorized by the agreement. There's been some debate recently on the legal authority the executive branch has to make tariff changes (see 1612150045 and 1611150035).
President Donald Trump will meet with Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau over the next month or so in the hopes of renegotiating NAFTA, White House Press Secretary Sean Spicer said during a Jan. 23 press conference (here). The three leaders will try to negotiate an agreement within the "existing structure" of the three-pronged agreement, Spicer said. However, if there's persistent disagreement "and [Trump] decides to pull out, then we would have to go back to the drawing table in the future," he said.
Treasury Acting Under Secretary for Terrorism and Financial Intelligence Adam Szubin is acting Treasury Secretary as of President Donald Trump's swearing in, Treasury said in a news release (here). Szubin will take over for outgoing Treasury Secretary Jack Lew, and stay in the role until a new secretary is in place, Treasury said. Trump’s nominee for the position, Steven Mnuchin, underwent questioning during a Senate Finance Committee confirmation hearing Jan. 19. Once a new secretary is confirmed, Szubin will leave the government to “pursue other endeavors,” Treasury said. Senate Finance Committee Chairman Orrin Hatch, R-Utah, said ensuring that the next Treasury secretary advances pro-growth trade policies will be a priority, noting in his opening statement (here) that Treasury plays a key role in oversight of customs revenues and international investment agreements. Hatch also signaled concern about the possibility of unilateral import tariffs, saying those proposals need to be "carefully evaluated to ensure they do not hurt us at home." Hatch also called on Trump's Treasury Department to engage more effectively in trade policy consultations with his committee than the Obama administration did. House Majority Leader Kevin McCarthy, R-Calif., introduced Mnuchin, and said the nominee would work with Trump and Congress to implement a trade policy to benefit all Americans.
Sen. Mike Lee, R-Utah, plans to introduce a bill that would make all executive branch trade actions, including tariff raises, subject to congressional approval, as part of his call for Congress to reclaim constitutional powers to lead U.S. trade policy, he wrote in an opinion column for Forbes (here). The yet-to-be-introduced Global Trade Accountability Act would help ensure that Congress would be involved in any decision that would increase trade barriers, Lee said. One example of a statute giving the executive branch “far too much power” to raise tariffs is Trade Act of 1974 Section 122, which allows the president to impose temporary import “surcharges” of up to 15 percent on any goods to deal with “large and serious” U.S. balance-of-payment deficits, Lee said.
Renegotiations of NAFTA should begin very early during the new Trump administration, Commerce secretary nominee Wilbur Ross said Jan. 18 during his confirmation hearing before the Senate Commerce Committee. Ross’ pledge aligns with a recent report that the nominee indicated to Canadian officials that he plans to issue a formal notification of plans to renegotiate the deal in the days after the Jan. 20 inauguration (see 1701180018). “As to Canada and Mexico, the president-elect has made no secret in his public remarks, nor have I in earlier remarks during the campaign, that NAFTA is logically the first thing for us to deal with,” Ross told senators. “We ought to solidify relationships in the best way we can in our own territory before we go off to other jurisdictions. So I think that … will be, if I’m confirmed, a very, very early topic of this administration.”