LONDON (Reuters) - Canadian Finance Minister Bill Morneau said on Friday he could not judge the likelihood of the United States introducing a new border tax following meetings with U.S. officials this week.
Speaking in London, he said discussions with the White House over the last few days had underscored that President Donald Trump’s team was pushing for broad U.S. tax changes but said he would make no guesses at any outcome on trade tariffs.
Trump’s proposed Border Adjustment Tax (BAT) has sent shivers through all major exporters to the U.S., and especially neighbors like Canada and Mexico whose companies sell an enormous amount of their goods there.
It would exempt U.S. export revenues from federal corporate tax but levy an implicit 20 percent tax on imports by preventing U.S. companies from deducting the cost of imported goods and supplies.
“I can’t handicap (judge chances of) an outcome other than to say I spoke to Steven Mnuchin about the ideas of this U.S. administration,” Morneau said.
“I think they are very clear about corporate taxation rates in the United States, which they see as a challenge, and they do talk about the importance of dealing with middle class taxation as well.”
Morneau, who said that Canadian growth looked like being better-than-expected this year, added that Trump’s team and local U.S. decision makers were “fully aware” of Canada’s view that a border tax would be detrimental all around.
“They are fully aware of developments, we have been met with a positive response (from local officials and mayors)... In the White House, they do as well, but they are also making sure it works for the United States.”
Morneau also touched on Canada’s hot-running housing market, acknowledging the need for affordable housing, and also said he had steered away from ideas like hiking capital gains tax in the country’s recent budget.
He said a trade deal with Britain as it leaves the European Union would happen after the two sides had reached their own new arrangement, adding that Canada would be “respectful” and “supportive” during the delicate process.
“We hope that we can have an agreement with the UK rapidly afterwards (after Britain leaves the EU) and would be making sure that we have the ongoing dialogue that will allow that to occur,” he said.
He said the forged but still-to-be-ratified Comprehensive Economic and Trade Agreement (CETA) EU-Canada trade deal would be used as a ‘framework’ with Britain, though it doesn’t include financial services, which play an oversized role in UK economy.
“I think trying to change that agreement at this particular juncture ... people may have other things they’re working on,” Morneau said.
Reporting by Marc Jones and Ritvik Carvalho; Editing by Tom Heneghan