Trump's new trade policy

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So what is a border tax and how exactly would it work? My former colleagues at the non-partisan Peterson Institute for International Economics just held a conference on the subject that sheds light on the details of a potential border tax plan — and the reviews are not especially positive. Putting aside the irony of a Republican president’s first major economic initiative being a tax increase, the so-called border adjustment tax would serve as a way to punish firms for doing business abroad, even though many US companies depend on such operations for their profitability.

A border adjustment tax works by "denying business deductions for imported goods and services and excluding exports of goods and services from the tax base," says trade economist and Peterson Institute senior fellow Gary Hufbauer. The problem, says Adam Posen, a former policymaker at the Bank of England and president of the Peterson Institute, is that the costs would vastly outweigh the narrow benefits to exporters, who are now lobbying favor of Trump’s proposed tax.

“From a macro perspective, from a broad tax perspective, the amount of revenue you're going to get is very low, the amount of distortions you're going to create is very high, the amount of trouble you're going to create for the US and the world economy is very large, and the distributional effects are not trivial,” said Posen. “They're actually very harmful.”

The problem with Trump's border tax plan - Business Insider