Border tax unlikely on crude: analysts
Trump calls proposal from U.S. House Republicans ‘too complicated’
Amid angst that protectionist measures proposed in the U.S. could punish Alberta’s oilpatch, two analysts said Wednesday the feared border tax is unlikely to be implemented.
Republicans in the House of Representatives have pitched the border adjustment tax as part of broader plans to increase U.S. manufacturing by taxing imports and cutting corporate taxes for American exporters. The proposal has created some consternation in Alberta, where there are fears the measure would further lower the price of the province’s crude exports across the border.
Still, president-elect Donald Trump, who will be inaugurated Friday, was critical of the border tax in an interview with The Wall Street Journal last week, calling the measure “too complicated.”
Robert Johnston of the political risk consultancy Eurasia Group told a Calgary crowd Wednesday there is little chance the U.S. would pass a border tax, and even less likelihood it would affect crude.
“When Trump says it’s complex, I think we’re quick to throw it away and say, that’s Trump being Trump again, but I think he’s absolutely right,” Johnston said during a forecast of risks and opportunities facing the energy industry in 2017.
Johnston said President Barack Obama “got into trouble” by introducing “unbelievably complicated” programs, including Obamacare.
“There’s all kinds of issues at the border in terms of trade skirmishes with China and Mexico and probably Canada through NAFTA, but this particular program (border tax) is full of problems,” Johnston said.
Peter Tertzakian of ARC Energy Research Institute, noted many U.S. refineries are designed to accept heavy oil from markets such as Canada. Still, he said investor fears over the border tax will likely cast a pall over Canadian energy stocks during the early period of Trump’s presidency.
“You’re going to have a period, potentially the first hundred days, where there’s going to be just a lot of hesitation to invest, whether it’s Mexico, Canada or other foreign countries,” Tertzakian said.