WASHINGTON—U.S. President Donald Trump and Republican leaders in Congress have agreed to drop an import-tax proposal that was strongly opposed by the Canadian government of Prime Minister Justin Trudeau.
“While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform,” Trump’s treasury secretary Steven Mnuchin, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell jointly announced in a news release on Thursday.
The tax, known as a border-adjustment tax, was strongly advocated by Ryan but faced major resistance in the Senate, where it was thought to be dead on arrival had it been pursued. Trump himself had sent mixed signals, at one point claiming it would create jobs and at another saying it was “too complicated.”
Trudeau spoke against the tax while addressing energy executives in Houston in March.
“Recognizing, of course, how much the Canadian economy depends on close collaboration and integration with the American economy, anything that creates impediments at the border — extra tariffs or new taxes — is something we’re concerned with,” Trudeau said.
At the World Economic Forum in New York in April, Finance Minister Bill Morneau said Canada believes the tax would create “an initial negative for both economies — and that the negative may be worse for the United States economy.”
In broad terms, the tax would have been applied to imports — perhaps at a rate of 20 per cent — but not to exports. Retailers and other businesses reliant on imported goods had argued that the tax would increase costs for U.S. consumers.
The announcement comes less than a month before the formal opening of negotiations on revisions to the North American Free Trade Agreement. The talks begin in Washington on Aug. 16.