Donald Trump's surprising election and his promise to overhaulthe U.S. tax code set off celebrations across corporate America– but some industries barely applauded before theybegan gearing up for a fight.

Trump's win gave Republicans control of the U.S. government forthe first time in a decade and quickly drew attention to a tax planthat House Speaker Paul Ryan unveiled last summer with littlefanfare. Ryan's radical tax-code rewrite would replace thecorporate income tax with a 20% tax on businesses' domestic salesand imports; their exports would be exempt.

Cue the alarm bells for import-heavy companies like Wal-Mart,Target and Nike. Retailers, apparel makers, shoemakers, automakersand others unleashed one of their most robust lobbying and publicrelations pushes in recent memory against the so-called“border-adjusted” tax. Buttressed by more than 10,000 phone callsto congressional offices, by a parody-style TV ad that aired during“Saturday Night Live” and by a succession of Republicans who'veexpressed concern about the plan, the opponents' efforts appear tobe winning. So far.

But the action has now shifted to the White House, which will be“driving the train” on tax legislation, press secretary Sean Spicersays. There, the picture gets cloudier; lobbyists on both sides ofthe border-adjustment tax issue say they're not sure who'lldetermine the final contents of the administration's plan.

“Clearly, the retailers getting out so fast and so aggressivelyearly was” an advantage in lining up congressional opposition toRyan's plan, said Gordon Gray, director of fiscal policy for theAmerican Action Forum, a right-of-center think tank in Washington.But it's still early, he said, and “unless we know where the WhiteHouse is going to come down on it, it's hard to say who iswinning.”

Ryan and Rep. Kevin Brady, the Texas Republican who chairs theHouse Ways and Means Committee, have championed theborder-adjustment plan as a way to raise revenue that would helpfinance tax-rate cuts. Independent estimates have said it wouldraise more than $1 trillion in tax revenue over 10 years. They alsosay it would help American-made products compete more effectivelyin overseas markets, while stimulating more domesticmanufacturing.

Those who oppose the border-adjusted tax say it would lead tohigher prices on a range of consumer goods, though supporters say astrengthening dollar would ultimately even such effects out.Opponents have gained valuable allies in Trump's administration.Treasury Secretary Steven Mnuchin is said to oppose theborder-adjustment concept, as is Gary Cohn, Trump's top economicadviser.

'Economic Nationalist'

Meanwhile, Stephen Bannon, the president's chief strategist, whofavors an “economic nationalist” approach, is said to favor theproposal.

The retailers were aided early when, less than a month intoTrump's presidency, they scheduled the CEOs of several retailcompanies to meet with Cohn, the head of the National EconomicCouncil. Cohn elevated the event to a meeting with the president onFeb. 15, at which the border-adjustment plan was discussed,according to people familiar with the meeting.

Trump himself hasn't weighed in yet – and thatlack of clarity has left Ryan's plan without much political cover,leaving it open to attack, said Gray of the AAF.

The main opposition group, Americans for Affordable Products,debuted Feb. 1, and now has more than 400 member companies. A floodof CEOs, including J.C. Penney's, haven't been shy about lambastingthe border-adjustment proposal. Wall Street analysts have chimedin; the concept “would be a really big hit to some companies,” saidScot Ciccarelli of RBC Capital Markets. Retail stocks have declinedthis year while the overall market hit new heights.

“No other issue galvanized the industry like this one,” saidBrian Dodge, senior executive vice president of public affairs forthe Retail Industry Leaders Association, one of the groups leadingthe opposition. “Until the sponsors declare it dead, we willcontinue to fight against it.”

Opposition to border adjustments also came from Americans forProsperity, the conservative advocacy group founded by billionairebrothers Charles and David Koch. AFP says it has placed more than10,000 telephone calls to members of Congress and made more than100 visits to district offices in the past six weeks.

The border-adjustment plan has supporters too. One day after theopposition group made its debut, the American Made Coalition wasannounced. It has fewer than 30 major companies as members– almost all of them net exporters– but they include household names like GeneralElectric, Caterpillar and Merck & Co.

Ads Planned

The supporters say border adjustments would boost domesticmanufacturing and reduce incentives for U.S. companies to move jobsoverseas. They're planning to launch new ads this month as Congresstakes a two-week spring recess.

“There's a lot of tax reform debate to be had,” said JohnGentzel, a spokesman for the supporters' group. He said theborder-adjustment measure would create 1.7 million new jobs andboost wages by almost 8%. “Meanwhile, the opposition has spent allthis time and energy trying to maintain status quo tax policiesthat promote foreign-made products over U.S. jobs.”

Amid the corporate division on the issue, Washington's usualbusiness lobbying has been thrown into disarray. Powerhouses likethe U.S. Chamber of Commerce, the American Petroleum Institute andNational Association of Manufacturers have been neutral becausetheir memberships are split on the issue. Same for the BusinessRoundtable.

“Regardless of how that issue comes out, you will see theBusiness Roundtable coming in strongly to help pull reform acrossthe finish line,” JPMorgan Chase & Co. CEO Jamie Dimon, whochairs the group, told Bloomberg last month.

Wall Street has also mostly stayed quiet on border adjustmentsbecause it's not clear how businesses such as trading and lendingwould be treated under the House GOP plan. Financial industrylobbyists see the proposal as a nonstarter in the Senate because ofthe opposition generated there by the retailers and theirallies.

“It has proved to be a very controversial issue, particularly onthe Senate side where it doesn't look like there is going to beenough support for it,” said Mike Sommers, the president ofAmerican Investment Council, which represents private equityfirms.

But all bets are off if the House plan for a border-adjustedtax, or BAT, is defeated and Congress begins looking for other waysto help finance tax cuts – which might draw anynumber of other companies into the fray.

“If you think the fight over BAT is ugly, just wait– because what comes next is going to be a muchbigger food fight,” said Charles Gabriel, president of CapitalAlpha Partners, a policy research group in Washington. “We haven'teven begun.”

From: Bloomberg News

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