Border tax would slash Canadian growth: study

trump border
President Donald Trump listens during a joint news conference with Canadian Prime Minister Justin Trudeau in the East Room of the White House in Washington, Monday, Feb. 13, 2017. (AP Photo/Pablo Martinez Monsivais)

OTTAWA – 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 said Tuesday.

The study was released 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 U.S. 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.

When asked whether Trudeau learned more about the border-tax proposal, a spokeswoman 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 tax-reform 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.

“Therefore, it’s not possible for us to start the negotiations at a technical level and we haven’t started,” she said.

“Yesterday’s conversation with the president was very productive. It’s a good start.”


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