GOP Border Tax Could Be Boon for Domestic Energy | NTK Network GOP Border Tax Could Be Boon for Domestic Energy

GOP Border Tax Could Be Boon for Domestic Energy

Some industries have expressed opposition to possible Trump's border tax, but a substantial share of US energy consumption comes from foreign sources, leaving an opening for domestic energy producers.

By NTK Staff | 02.03.2017 @2:57pm
GOP Border Tax Could Be Boon for Domestic Energy

According to a recent Reuters report, various industries have chosen sides on a House Republican proposal to cut corporate taxes from 35 to 20 percent and raise taxes on imports from 0 to 20 percent.

The report read:

U.S. companies including major exporters General Electric Co (GE.N) and Boeing Co (BA.N) launched a coalition on Thursday to back a House Republican plan to tax all imports, saying the proposal would “support American jobs and American-made products.”

The group, comprised of more than 25 U.S. companies and dubbed the “American Made Coalition,” also includes Dow Chemical Co (DOW.N), Eli Lilly and Co (LLY.N), Pfizer Inc (PFE.N), and Oracle Corp, the companies confirmed.

The group’s launch underscored a growing division in corporate America over the House Republican proposal that would cut corporate income tax to 20 percent from 35 percent, exclude export revenue from taxable income and impose the 20 percent tax on imports.

On the other hand though, “retailers, oil refiners, and foreign automakers” have voiced their opposition to the change, “fearing that a big tax on imports would hurt their sales and profits and put them at a disadvantage to rivals more reliant on U.S.-made products.”

These changes however, could boost U.S. domestic energy producers.

The Chicago Tribune wrote of the possible tax change:

The tax would likely encourage companies to produce more in the U.S., or buy more of their parts and components in the U.S. Some companies say they could make those changes in order to avoid raising prices too much.

Robert Sands, the CEO of Constellation Brands, said on a recent conference call that the company could purchase more natural gas from the United States, rather than Mexico, which it uses to make glass for the Corona and Modelo beer it imports.

“It’s those kinds of things that we are looking at, planning on, if this comes to pass,” Sands said. “We don’t expect consumer demand for our product to be affected.”

Domestic natural gas made up 90 percent of natural gas consumption in 2015, but that number could climb higher with a border tax. Business owners like Sands could cut their foreign gas usage and turn to American producers.

Renewable energy sources would face differing prospects depending on their manufacturing base. For example, in the wind industry, “U.S. content in recent years has increased to nearly 70% of the value of the average wind turbine installed in the United States,” according to the Congressional Research Service.

However, solar energy could face difficulties with a 20 percent tax on imports. According to a 2015 CRS report: “As part of their global business strategies, U.S. solar panel manufacturers source a significant share of components outside the United States. Imports of solar cells and panels nearly tripled from 2009, reaching $3.6 billion in 2013.” Given the large share of solar manufacturing outside the United States, a tax on imported goods would naturally drive up industry costs.

Although American dependence on foreign oil has decreased in recent years, foreign petroleum still consisted of 24 percent of all U.S. petroleum consumption in 2015, according to the U.S. Energy Information Administration. A 20 percent tax hike on a quarter of the U.S. petroleum supply would further encourage natural gas production, and it could even influence what types of cars Americans purchase. Alternative fuel vehicles currently make up less than .5% of the total automobiles in the United States, but a hike in fuel prices could foreshadow a shift toward transportation fueled by other means.

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