Border tax idea isn't dead yet, execs warn

NEW YORK -- Consumers would "revolt" if dealers tried to pass along price increases related to a tax on goods crossing the border into the U.S. from Mexico, said Peter Welch, president of the National Automobile Dealers Association.

He was one of several speakers at the NADA/J.D. Power Automotive Forum here who warned against the idea of such a tax, even as they agreed that plans to impose tariffs on goods from Mexico seem to be off the front burner for the Trump administration -- for now.

"Our customers are incredibly price sensitive," Welch said. "$1,700 is one number I've read. If that actually trickles down to the hood of a car, we would see an economic calamity the likes of which we've never seen before." 

John Bozzella, CEO of the Association of Global Automakers, said, "I'm from the school of politics that it's never dead until it's actually dead." 

He added, "I do agree that we need tax reform," but a border adjustment tax "raises the price of every single car every dealer in this room sells." 

Mitch Bainwol, CEO of the Alliance of Automobile Manufacturers, said he thought the border tax has a "less than 50-50" chance of passing. He hinted the odds could be lower. "I'm trying to come up with a number that's least likely to create news," he said. 

Separately at the forum, Nariman Behravesh, chief economist for IHS Markit, said, "There's no border adjustment tax; that's dead." He said populism could cut either way, depending whether the Trump administration emphasizes protectionism or pro-growth. Protectionist populism would hurt the industry and could trigger a recession, he said, but he said he thinks that's unlikely. He added: "The -upside is, a pro-growth agenda could be really good."