Congressional leaders have signaled that they will scrap a border tax on incoming goods, including cars, as part of a larger tax overhaul proposal.
"While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform," U.S. House Speaker Paul Ryan said in a statement Thursday.
Some estimates pegged the cost to consumers for a border tax at up to $17,000 on some cars, and automakers rallied this month to kill the tax provision.
Auto dealers applauded the decision in a statement Thursday.
"The framework released today by Congress and the Trump administration places the tax reform train squarely back on its tracks," American International Automobile Dealers Association President Cody Lusk said in a statement. "The border adjustment tax would have driven up costs on everyday goods and put Americans out of work. Now that it's off the table, and the business community is no longer divided by this issue, we can now get back to work on supporting this important legislation."
The AIADA said the tax would have added, on average, about $2,000 to the cost of all cars sold in the U.S., regardless of their origin. No vehicles are made with 100 percent American parts, the group said, and even cars made by domestic automakers would have added thousands of dollars to the prices of current models.
A study by the Center for Automotive Research estimated that a border tax would immediately reduce the sales of new cars by more than 5 percent. A similar study by UBS Research said that a border tax would cut the number of new car sales in the U.S. by roughly 2 million.
Lobbyists said the border tax would have hit low- and middle-income families disproportionately hardest.