Republicans face corporate tax rebellion over Trump punitive import taxes

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The cause of the uproar is a proposal to tax imports that is sending shockwaves through global supply chains, as Republicans in the House of Representatives champion it as part of a plan to encourage US companies to buy more American goods.

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"This is something that has really gone all the way up to the boardroom, which doesn't often happen in Washington," said Stephen Lamar, executive vice-president of the American Apparel and Footwear Association, who called the import tax an "existential" threat to his industry.

With 98 per cent of clothes sold in the US made overseas, the National Retail Federation said the import tax could inflate the tax bills of some fashion chains to three to five times their pre-tax profits, jeopardising their solvency.

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As businesses wake up to the significance of the import tax, which had been largely overlooked until this month, it has crushed post-election optimism that was founded on Republican vows to cut the corporate tax rate from 35 per cent to 20 or 15 per cent.

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The House plan will provide the template for tax legislation to be negotiated next year with the president-elect, who has said fixing the tax code is a top priority. Mr Trump has not taken a position on the import tax, known by experts as a border tax adjustment.

But Reince Priebus, incoming White House chief of staff, told radio host Hugh Hewitt on Wednesday: "Our goal should be to try to make everything we can in the United States so that the money gets put in the pockets of Americans ... We want to see the potential for a change in that border adjustability so that American jobs are protected. That's the point."

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The border tax adjustment would work by denying US companies their current ability to deduct import costs from their taxable income, meaning companies selling imported products would effectively be taxed on the full value of the sale rather than just the profit.

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Mr Brady, the chief tax writer in the House, told the FT: "We're working to deliver a globally competitive tax code built for growth that will encourage companies to invest in America and create jobs at home. Instead of focusing on one piece of our comprehensive plan, it's important for companies to consider all of the aspects of our blueprint including lower rates for corporations and a simpler international tax code."

Devin Nunes, a Republican member of the tax committee, said the import tax rebellion reflected how companies were looking at the results of static financial models that did not reflect "all the moving parts" of the tax plan.