Economists seem less worried about it for several reasons.  First, other countries we trade with use the same thing against us.  Second, a BAT is not a trade restriction such as a tariff or quota that the World Trade Organization (WTO) can overturn as being in violation of a previous trade agreement.  Third, a BAT is not a trade export subsidy that would lead the WTO to approve countervailing duties so as to offset it.  Last and most important, a BAT does not effect retailers in such a negative way as is being portrayed on the news.

Taxes can be forward shifted on to consumersthrough higher prices only if consumers have completely inelastic demands in the long-run.  They don’t.  Raising prices to cover the tax on imports will result in less consumption by consumers at the higher prices.  Surplus inventories will result when less is bought through retail.  Retailers will then have to lower their prices to deplete the excess inventory.  Retailers, in turn, will purchase fewer imports as a result.  Thus, if foreign sellers want to sell a greater amount to the U.S., the border tax will end up being backward shifted on to them when they are forced to lower their prices to sell more.  In the end, some higher prices will be paid by U.S. consumers but at least part of the burden of the tax will fall on foreign sellers that have lowered their prices.

As for the dollar, fewer imports being bought at lower prices means fewer dollars circulating in the foreign exchange markets.  That will cause the dollar to appreciate and a stronger dollar is a deflationary factor inside the U.S.  Not only will imports become less costly because of the backward shifting of border adjustable taxes, but also because of the increased value of the dollar. Thus, it seems that retailers and consumers in the U.S. really have much less to fear from a border adjustable tax than one might gather from watching the news commentary.

Also, the BAT can be applied only to final goods. That is, to only those final goods made entirely in a foreign country. Intermediate goods that are inputs to U.S. production that are made in foreign country’s or that may cross the border several times before becoming a finished or final U.S. good can easily be exempted.  

There are a few negative consequences aside from the small forward shifting of the tax onto U.S. consumers. A BAT is an anti-trade policy because it will not only reduce imports, it will also make it harder to export because of the upward effect on the dollar exchange rate. Thus, total trade is reduced, but by only a little. It is also a beggar-thy-neighbor trade policy because it benefits our producers at the expense of foreign sellers through the backward shifting of the tax burden. Still, because it is not a violation of any trade agreement no foreign nation or producer can go to the WTO and demand it be overturned.

Because of the increased tax revenue, the U.S.would gain the benefits of lower corporate and income taxes that will have expansionary supply-side effects such as greater investment, more job creation, and less capital flight.  If some government money collected from the border tax can then go towards infrastructure investment, supply-side effects from increased levels of productivity will induce economic growth that carries further into the long-run.

(Note:  Forget the Keynesian short-run expenditure multiplier effects from increased government expenditures.  The supply-side effects of increased productivity are the main benefit. This is because all expenditure multipliers quickly go to zero.  In other words, Keynesian expenditure
effects from government expenditures, even those on infrastructure, are more like a July 4th fireworks display as opposed to the supply-side effects of a whole year’s worth of increasingly productive work, saving, and investment.)