The USA: a ‘border tax’?

01/06/2017

François-Xavier Branthôme

Italy,

North America

The new trade policy could have a major impact on Italian exports

At the end of March, the Italian agricultural association Coldiretti warned of the possible consequences of the ideas being currently floated by US authorities regarding the possibility of applying a "border adjustment tax" on imports of a number of food products. According to information picked up by the Italian press, a "blacklist" is reportedly being established. It is said to already include 90 products, among which canned peeled tomatoes and tomato pulp.
As it stands, the proposal would exempt U.S. corporate export revenues from federal taxes, while requiring U.S. companies to shoulder the same flat 20% tax rate on supplies and other purchased products, whether produced overseas or domestically. President Trump appears to favor an import tax that could be adjusted to reflect the country of origin's tax rate for U.S. products, saying such an approach could take the form of a trade policy rather than a tax policy. "There has to be a certain reciprocal nature to it," the president said.

In 2016, the USA accounted for 5.5% (approximately USD 104 million) of the total turnover (USD 1.9 billion) generated by Italian exports. The proportion of Italian foreign sales attributed to US purchases has grown regularly over the past 20 years, from some USD 18 million (2.3% of the total Italian turnover) in 1997 to more than USD 111 million (5.4%) in 2014/2015.

The only sector that would be particularly vulnerable in the case of additional taxation would be the canned tomato category, for which US imports have represented an increasingly important outlet in recent years, to the point of accounting for 9% of the volumes exported and of the total turnover for this category. Annual US purchases of pastes and sauces from Italy have not exceeded a few thousand tonnes in recent years (0.8% of total Italian exports of pastes and 2.1% of the country's exports of sauces, on average between 1997 and 2016).