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The Globe and Mail

Trump, TV, and a border tax: Canada gripped by a new reality show

It's no secret that U.S. President Donald Trump watches a lot of television. At this point in his presidency, his predecessor was saving the global financial system and poring over bricks on Franklin Roosevelt's first 100 days. Barely 60 days into his, Mr. Trump is spending long hours in the White House, remote in hand, obsessively stewing over what's being said about him on CNN, Fox News and MSNBC.

Lobbyists, interest groups and members of his own party have quickly learned where to turn if they want to get through to the new President. When they're not appearing as talking heads, they're running ads on cable news in the Washington market aimed at an audience of one.

Now that Mr. Trump's first attempt at legislative change has crashed – with the spectacular failure of a House bill to "repeal and replace" Barack Obama's signature health-care law – the President is desperate for a win. After ceding control to House Speaker Paul Ryan, who crafted the doomed Republican bill, the White House is likely to want to take the lead on tax reform, the next major item on Mr. Trump's agenda. And those ads on cable news for and against a border adjustment tax, or BAT, could just determine Canada's fate.

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A U.S. BAT, essentially a levy on imports, would be Canada's worst nightmare. But while many Canadians indulged in schadenfreude after Mr. Trump's health-care crash and burn, the bill's failure increases the likelihood of a BAT being included in the administration's tax reform package. Republicans had hoped to save hundreds of billions of dollars by repealing Obamacare subsidies – savings they aimed to plow into individual and corporate tax cuts. Now, to cut income taxes, they will need to come up with new revenue elsewhere. Enter the dreaded BAT.

Read more: Canada won't escape Trump's protectionist measures as 'border tax' threatens exports

Granted, the biggest champion of a BAT is Mr. Ryan himself, and he's currently in the dog house with Mr. Trump. But Mr. Ryan has a strong argument up his sleeve. Without the projected $1-trillion (U.S.) over 10 years that a 20-per-cent BAT would raise, Mr. Trump's promise to slash income taxes would have to be dramatically scaled down, possibly to the point of meaninglessness.

To get any tax reform package through the Senate, where Republicans hold only 52 seats, they will likely need to use a procedural measure known as reconciliation to avoid a filibuster by Democrats. Under reconciliation, Senate bills can pass with a simple majority (rather than a filibuster-proof 60 votes) provided they do not add to the long-term federal deficit. That means income tax cuts will need to be offset by spending cuts or new revenue measures, such as a BAT.

Luckily for Canada, Republicans are as divided on the BAT as they are on health reform. Mr. Trump's chief strategist, Steve Bannon, a self-described economic nationalist, supports the BAT idea. But Treasury Secretary Steve Mnuchin does not. The leaders of the hard-core conservative Freedom Caucus, the same ones who refused to vote for Mr. Ryan's health bill because it preserved some subsidies, are against a border tax. So is Arkansas Senator Tom Cotton. His state is home to Wal-Mart, which, like most retailers, imports a lot of stuff. But some Democrats from industrial states, whom Mr. Trump would like to bring on board to support his tax reform package, could be tempted to vote for a BAT.

The precise workings of a border adjustment tax are way too complicated for someone as uninterested in policy as Mr. Trump to grasp, which is why he was initially cool to a BAT. But after meeting last month with the pro-BAT CEOs of Boeing, General Electric and Caterpillar, he seemed to be warming to the idea. "It could lead to a lot more jobs in the United States," he said, adding: "I certainly support a form of tax on the border."

This is where those cable-news ads come in. Last week, a pro-BAT group called the American Made Coalition launched a new ad promising to "saturate cable news channels … in the D.C. metro area." Its images of shuttered factories are tailor-made to tug on Mr. Trump's America First heartstrings. The National Retail Federation, meanwhile, has a spot spoofing infomercials that describes the BAT as a tax "specially designed to make your disposable income disappear."

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Billions of dollars in Canada-U.S. trade could depend on which ad most grabs the TV-addict-in-chief.

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