Border Adjustment Tax and Changes to NAFTA

Date: July 19, 2017
Topic: Public Policy

Two proposed policy changes - imposing a border adjustment tax (BAT) and withdrawing from the North American Free Trade Agreement (NAFTA) - would likely fail to achieve their goal of reversing the trend of offshoring manufacturing to low-cost countries and could potentially harm the US motor vehicle industry, according to a new study by The Boston Consulting Group (BCG).

The study, commissioned by the Motor & Equipment Manufacturers Association (MEMA) and conducted independently by BCG this spring, examined the real-world implications of a border tax and changes to NAFTA on the motor vehicle sector - how they would impact new-vehicle and supplier costs, new-car features and prices, consumer purchases, jobs, and trade. It also looked at how global macro trends in the industry are affecting the goal of encouraging reshoring and what alternative policy actions could be taken to spur growth in US automotive manufacturing. It found that car prices, vehicle sales, supply chain decisions, and industry employment could all be negatively affected by the proposals.

View MEMA's press release on the study here

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