The fashion industry in the US is opposing the proposed border adjustment tax. American companies importing items such as jeans would be required under the border adjustment tax to add the cost of those goods to their profit when calculating their corporate income tax bill. That could produce a situation where a company’s tax bill is greater than its profit unless the company significantly increases selling prices. Higher prices, in turn, would lower overall demand.

Companies importing materials like cotton to produce clothing domestically would also face an increased tax bill. The US fashion trade believes a new tax would lead to apparel price inflation far exceeding wage inflation. Companies feel such a tax will put them out of business. The US administration is proposing to revamp the nation’s tax policies to stimulate domestic production and exports. To compensate for the budget shortfall, a greater tax burden would fall on import industries, such as clothing.

About 97 per cent of apparel sold in the US is imported. America doesn’t have the necessary factories or the trained workforce to make up for imports. It would take a generation or two for the US textile industry to get to such a level.