RIO GRANDE CITY, RGV – For the entire auto industry, just to be talking about a Border Adjustment Tax is bad enough.
And even when U.S. Congressman Henry Cuellar says he thinks U.S. President Donald Trump won’t be able to implement this tax, the fear still exists.
Billy Canales, owner of Rio Motors and a Starr County Industrial Foundation (SCIF) Board Member, discussed BAT with Cuellar at a Border Security Roundtable hosted by the congressman and SCIF at South Texas College’s Starr County Campus on Monday.
Canales said he recently visited Detroit, Michigan, and the level of concern over the BAT in Motor City is very high. Canales pointed out that as a percentage of gross domestic product, Michigan has the highest percentage of imported goods. The reason for this is many imported parts are used in the manufacture of automobiles.
“A Border Adjustment Tax would lead to a tremendous increase in the costs of cars, not only the ones that are built in Mexico, but the ones that are built over here,” Canales said.
When it comes to putting together a car, Canales said, some parts cross the Mexico-U.S. border many times, so if the U.S. government imposes a 20 percent tax on imported goods, as some have called for, then it stands to reason the price of the cars would need to go up.
“If each time the government charges a 20 percent border adjustment tax you could be charging that 20 percent four times, with raw materials going back and forth across the border. The assumption is that the price of the cars would go up $2,500,” Canales said.
Americans for Prosperity issued a report on the likely impact of a Border Adjustment Tax. It noted, just as Canales said, that Michigan would pay a high price if such a tax is imposed. The report shows Texas is No. 8 for the imported goods. Click here to read the report.
According to Canales, President Trump was on the campaign trail he didn’t really know what impact a border adjustment tax would have. He said he is reassured that such a tax will have to be passed by Congress.
“Just the fact that they’re talking about a Border Adjustment Tax is having an impact right now. The business situation has slowed down, our sales have slowed down. At the end, we all depend on what happens on each side of the border,” Canales said.
Cuellar agreed with Canales’ comments, noting that President Trump will have to talk to Congress if he wants to change the tax structure.
“A lot of things that the President wants to do, he’s gonna go into what we call the reality of Congress, and he won’t be able to walk with this. This is not Trump Enterprises,” Cuellar said.