The American Apparel & Footwear Association (AAFA) has reinforced its opposition to the proposed Border Adjustment Tax (BAT) provision, which it says will increase prices for consumers and hit jobs.

A Border Adjustment Tax (BAT) is one of a number of options being considered by the Trump administration. It would cut corporate income tax to 20% from 35% but stop companies deducting the cost of imports into the US from their taxable profits. Instead, it would impose a tariff on imports, including raw materials and components used in manufacturing, and exempt exports from the calculation.

However, the move has garnered much opposition from the US retail and apparel industry.

In response to a request for input ahead of the House Ways and Mean Committee's 'Increasing US Competitiveness and Preventing American Jobs from Moving Overseas' hearing yesterday (23 May), AAFA CEO, Rick Helfenbein, said: "While it is clearly time to institute tax reform, the border adjustment tax would have a disturbing impact on the US apparel and footwear industry and refutes many of the positive provisions included in the overall House tax blueprint.

"Unfortunately, and without question, the BAT would result in increased prices and job losses for our industry. Furthermore, this BAT provision would adversely impact low-income American families that rely on inexpensive essentials, such as clothes and shoes. The BAT must not be included in corporate tax reform, period."

The AAFA says the BAT provision could also lead to potential bankruptcies. Its comments also refute the claim that changes in the exchange rate would offset price increases, and list the unintended impacts the BAT would have on international trade relations.

"The BAT appears to violate at least two tenets of international trade law – national treatment and prohibition of export subsidies – that may lead to authorised retaliation in the World Trade Organization (WTO) and in free trade agreements. With US exports of textiles and clothing being among the top targets routinely identified in retaliation lists, many exporters in our industry are concerned the BAT could trigger a trade war that would make their products less competitive abroad. Even if these trade bodies find the BAT does not contradict US trade obligations, this merely opens the door to those partners imposing their own BAT – creating more economic turmoil," the AAFA explains.

The comments follow those of the National Retail Federation (NRF), which has made its opposition to the proposed border adjustment tax clear on a number of occasions, calling on Congress to instead update the existing federal income tax system through comprehensive reform.

Under either approach, the NRF says Congress should reject the proposed US$1 trillion tax that it says would drive up prices for consumers and cost the economy jobs.

US retailers renew call for border tax rejection