The Financial Times is reporting on Wednesday that U.S. exporters have come out in favor of a proposed 20% across-the-board tariff known as the “border adjustment tax”. At least a dozen CEOs from companies like Boeing and Caterpillar, all employers of working class and middle income Americans that fit in Trump’s wheelhouse of those he has stated to protect, signed a letter in support of House Speak Paul Ryan’s plan. They say the reform was consistent with the tax policies of other countries, the FT reports.
The border adjustment tax faces serious resistance from retail and importers in particular. As it is, the tax remains unpopular in congress. On Sunday, Sen. Lindsey Graham told Meet the Press, “The House is talking about a tax plan that won’t get 10 votes in the Senate.”
And on Wednesday, supply siders at Bretton Woods Research sent out a note to clients saying they believe equities are already discounting the political collapse of the tax plan.
“Our best guess is President Trump ultimately passes on the Ryan-Brady plan and will move closer to his original call for a 15% corporate tax rate,” report authors wrote. “As we see it, the Trump White House could address both issues without having to add a whole new layer of complexity to the tax code. “
Consensus now has it that investors are waiting for clearer direction on tax reform. Fiscal reforms have been one of the main stories of the nearly 10% rise in equities since Trump’s election. Many investors believe the market will continue rising until there is definitive news on tax reform. It will likely be a “buy the rumor, sell on the news” event when real changes are announced. The c-corp rate is the one to watch. Some global mutual fund managers have said that a 15% tax rate could possibly end Trump’s dispute with Mexico over NAFTA because it would give American companies a lower effective tax rate than they get in Mexico.