Exclusive—Nehlen: Paul Ryan’s Border Adjustment Tax As Bad As TPP

The Trans-Pacific Partnership was an awful swing and miss by the globalist donor class and GOP leadership.

To give you an amusing visual, imagine the ball slamming into the catcher’s mitt as you see a Louisville Slugger flying over the pitcher’s mound and the batter falling into the dirt. Good cut, Ryan. Keep your eye on the ball.

It was that good.

To redeem themselves, they’re stepping to the plate yet again.

The latest solution from GOP “leadership” grab bag of bad ideas is the ill-conceived proposal to “help” America with her huge ($491 billion) global trade deficit with the Border Adjustment Tax (BAT).

The idea goes like this: The U.S. will tax all imports at 20 percent and provide a rebate of 20 percent on American exports sold abroad. That is not only counterproductive from a trade deficit reduction standpoint; it is skewed to help large American corporations over small and mid-sized American producers.

American trade with many countries is a net positive for a slew of nations. Here’s a list of the top 15:


The first part of the argument is: Why would we put a blanket tax on global imports when we know damn well there are countries that prefer American products and demonstrate that every day with their checkbooks?

What we are telling these countries is, we want them to shop elsewhere, because we are going to penalize them no different than the truly problematic countries that stifle American imports and who are the real culprits. That list of countries, the list we should be focused on balancing our trade with, are the following:


In particular, the mercantilist countries that we should be laser focused on is China (-318.4), Japan (-73.4), Germany (-67.2), South Korea (-20.7), and Taiwan (-13.2), and is a subset of this deficit table. The U.S. Treasury Department issued a report in May of 2016 naming names. Those particular countries manipulate their currencies or subsidize their industries to the detriment of American imports. These are countries who are waging the battle against American workers. Therefore, they should be the primary focus of American attention as it relates to trade imbalance, but not the only focus.

I’ll get to the solution to this problem (tariffs, in particular, a scaled tariff) but first, let me explain why Ryan’s BAT favors large American corporations over small and mid-sized American businesses.

Exporting and successfully selling in the global market is an order of magnitude more complex than competing in the region in which your business is located. I should know. For 30 years, I’ve run successful privately held and publicly held Fortune 500 firms, at some points living as an ex-pat overseas.

Generally speaking, larger American firms tend to have an export component to their business already. Giving them a 20 percent break only strengthens them over small and mid-sized domestic producers, which would then be forced to enter the export fray in survival mode. That’s never a good motive and would result in chaos and unnecessary risk. The problem isn’t one for the government to fix by intervening in the domestic market. Small and mid-sized American businesses dodged a bullet with Trans-Pacific Partnership, and thank God for President Trump’s swift intervention scuttling the deal on his first Monday behind the Resolute desk.

The Border Adjustment Tax is merely a way for large donor class corporations to get a leg up on their competition courtesy of their enablers in the halls of Congress.

The solution is the scaled tariff. The tariff looks at the trailing twelve months (TTM) of trade balance between other nations and the United States. The tariff would only be applied to countries that have a significant or chronic surplus with the United States. The tariff would be adjusted quarterly up or down based upon the (TTM) figures. As trade heads toward balance, the tariff will self-adjust downward for that country. If a trading partner retaliates with counter-tariffs or currency manipulation that drive a greater deficit, the tariff will rise in direct relation to the (TTM) figures.

The groups that will argue against tariffs are either self-described free traders, big corporation lobbyists, or simply the misled. To them, I ask: How well is the “free trade deal” known as KORUS doing? It was signed in 2011 and has driven an 114 percent increase in South Korea’s already bloated trade surplus with the U.S. costing us over 100,000 jobs in the process. How’s that for progress?

There are those who may say: “We will end up paying for it in higher prices.” I say: Maybe in the very short term, just long enough for American manufacturers to fill the void or foreign corporations to co-locate facilities in America, employing Americans to build their products for consumption domestically and abroad, thereby avoiding the tariff.

To those who say: “They will just go elsewhere to sell their products,” I say if they could do that now why wouldn’t they be doing it, and the demand doesn’t go away because of a tariff on imports. That void will be filled either by domestic manufacturers or foreign shipments with a Treasury check.

Meanwhile, a freight train of money will be steady delivering tariff collections to the U.S. Treasury, commingled with tax receipts from American businesses whose export businesses will explode when the tariffs are in place. The inbound tariff receipts will reduce the tax burden on everyday Americans.

Americans should not want a level playing field. Americans should expect their elected representatives to work on their behalf. South Korean trade representatives certainly work on behalf of their constituents.

Here’s a brilliant quote from Howard, Raymond, and Jesse Richman on the subject:

“Economists since Adam Smith have advocated free trade. But economic theory tells us that free trade will not be balanced except under very restrictive conditions: 1) all the trading partners use the same currency, 2) labor and capital are freely mobile between them, and 3) there are no barriers to imports or subsidies to exports. The reader will note that these conditions are imposed by the U.S. Constitution on the States. They do not exist internationally. To believe free trade is an appropriate policy currently is to believe in fairies.”

The sooner President Trump puts the scaled tariff into practice, the sooner we will make America great again.

Paul Nehlen is not another lifelong politician, but a business executive and inventor. Nehlen started out on the factory floor, and through God’s grace, grit, and determination rose to lead Fortune 500 manufacturing businesses around the world. Nehlen challenged Speaker Paul Ryan in Wisconsin’s 2016 First Congressional District to stop Trans-Pacific Partnership and secure America’s border. Today he is waging the battle against the refugee resettlement racket and leading the cause to fight for America’s values. He lives in Delavan, Wisconsin.

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