Republicans decide against the border adjustment tax

US retailers are breathing a sight of relief! In January, Republican lawmakers proposed a Border Adjustment Tax (BAT) that would basically levy potentially heavy fines on any goods that weren't made in America. This type of tax could also be thought of as a destination-based tax, since imported goods would be taxed, while US exporters would face no tax. President Trump, although holding a favorable view of made-in-America products and companies, had in recent months communicated a decidedly cooler view on the tax because of the complexities involved.

Retail leaders, meanwhile, were horrified at the potential of a near-doubling of current taxes and spoke up frequently and strongly against BAT at industry forums and before Congress. They had support from the energy industry as well, as oil refiners were another party that lobbied against the measure upon realization that the cross-border energy trade (oil imports) could also be considerably affected by BAT.

The elimination of BAT creates strong tailwinds for retailers as they enter into the holiday season and eliminates the small amount of uncertainty that had been overhanging refiners. Apparel retailers are potentially are the biggest winners here.

Relative overview of BAT can be seen here: http://www.latimes.com/business/la-fi-tax-reform-border-20170727-story.html