Donald Trump’s administration is talking about introducing a 20% “border tax” on imports to the U.S. to help pay for the proposed wall along the U.S.-Mexico border.
At this point, the tax is theoretical but apparently would apply to imports from countries with whom the U.S. has a trade deficit. If this holds true, imports from Canada will not be subject to the tax – the U.S. ran a trade surplus of almost US$12 billion with Canada in 2015.
With this tax, President Trump hopes to discourage outsourcing of jobs and manufacturing to Mexico and other foreign countries and to direct those activities to U.S. soil. Because the tax would make items more costly to bring into the U.S., it would theoretically encourage U.S. companies to make and buy items of U.S. origin.
The impact of such a border tax could potentially benefit some Canadian companies. Oil sands producers, for example – whose heavy crude competes with Mexican supplies for the U.S. refining market – would enjoy a competitive advantage if the new tax becomes a reality.
All this to say there is still a lot of uncertainty around the future of cross-border trade with the U.S. Stay tuned to this blog space for further updates as they become available. And feel free to email our trade consultants – whose job it is to keep current on the political and economic developments that could affect you – at any time.
Information provided by: Canadian Customs Consulting Dept. - Cole International