![Donald Trump has flagged a flagged a 'public safety and national security' mini-budget.](/content/dam/images/g/u/m/r/x/r/image.related.afrArticleLead.620x350.gumz7e.png/1488261672376.jpg)
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Donald Trump has given the strongest signal yet that his highly anticipated corporate tax cut plan for American companies will include some type of border tax on foreign imports to achieve, what he argues, a "fair" international tax and trade system.
But the tax overhaul will be delayed until a divided Congress agrees on the "complicated" task of replacing former president Barack Obama's health insurance law, Mr Trump said.
The warning came from the US President on Tuesday (AEDT) in Washington as he flagged a "public safety and national security" mini-budget to be unveiled in March.
It will propose a $US54 billion ($70 billion) or 10 per cent increase in defence spending to "start winning wars", deep cuts to foreign aid and less funding for government agencies.
![Peter Navarro is pushing for an import tariff against countries which have a trade surplus with the US.](/content/dam/images/g/t/g/d/g/k/image.imgtype.afrArticleInline.620x0.png/1488256825593.jpg)
Despite the President's protectionist tax overtones raising the chance of a trade war, the Dow Jones Industrial Average hit a record closing high for the 12th consecutive trading day in New York, equalling a streak set in 1987, the same year as the great stock market crash.
Mr Trump's detailed tax blueprint is expected to be unveiled in coming weeks after a major speech to Congress on Tuesday night (Wednesday AEDT), where he is scheduled to give high-level guidance on tax, replacing former president Barack Obama's healthcare insurance law and pledge a "big" infrastructure package.
A day before, Mr Trump said at the White House he was going to "make taxes between countries much more fair".
Any new US taxes would be "reciprocal" against other countries, he said.
"We're one of the only countries in the world that people can sell their product into us and have no tax, no nothing, and to get rich," Mr Trump said.
"But if you want to do business with them, you'll have taxes as high as 100 per cent."
The United States is the only advanced economy in the world that does not impose a value-added tax (VAT), such as Australia's 10 per cent goods and services tax (GST).
A VAT typically exempts exports from sales tax and taxes foreign imports so they compete on a level playing field against domestically-made goods, in line with World Trade Organisation rules.
It is unclear if the President's tax package will be consistent with a radical border adjustment tax (BAT) - which is akin to a VAT - that Republican leaders in the House of Representatives are pushing, or if it will be a modified version of the BAT.
President Trump could seek to impose a blatant tariff against foreign competitors with which the US runs large trade deficits - such as Mexico, China and Germany - as his trade and industry adviser Peter Navarro has advocated.
American Enterprise Institute scholar James Pethokoukis said there was a "tremendous risk" the President's tax policy could descend into trade protectionism.
"We don't know if the President is talking about border adjustment taxes, border taxes or whether these would be punitive retaliatory tariffs," he said.
Based on the President's limited public remarks, it might even be possible that the Trump administration would try to impose a 10 per cent tax on Australian goods sold into the US, just like Australia imposes the GST on US goods sold in Australia.
However, such a move would almost certainly contravene WTO rules.
Because the US does not apply a VAT, any move to tax imports into the world's largest economy could be deemed illegal and protectionist by the WTO.
VATs imposed in most non-US countries are allowed to tax imports and exempt exports so that goods consumed in a market are ultimately taxed at the same rate.
The President is unlikely to have the final say on tax reform, with both the House and Senate heavily involved in negotiations and pushing competing agendas.
The House leadership favours a 20 per cent BAT which would tax domestic sales, exempt exports and deny deductibility for imports.
House speaker Paul Ryan - backed by economists - argues the policy would be pro-economic growth and not protectionist because the US dollar would rise up to 25 per cent due to the tax's impact on trade and capital flows.
However, several Republican senators oppose any import tax because of concerns it could raise consumer prices or ignite an international trade war between countries.
Jacob Dweck, a partner at global law firm Eversheds Sutherland in Washington, said: "In the case of a broad-ranging border tax or tariff, particularly any that violates the WTO, you could expect US trading partners to impose retaliatory tariffs on US exports."
Fiscally-conservative Republicans in Congress insisting on revenue neutral tax reform are worried Mr Trump will dodge slashing the government's $US19 trillion gross debt and may even add to it.
"We will reduce taxes very, very substantially and simplify the tax code," Mr Trump said.
His original election plan was to slash the federal corporate rate to as low as 15 per cent, from 35 per cent.
The President wants to collapse seven marginal tax rates for individuals into three, with the top tax rate falling to 33 per cent from 39.6 per cent.
The "skinny" budget due in March will not be a complete fiscal document and be bereft of tax reform revenue projections, the President's budget director Mick Mulvaney said.
"We will be spending less overseas and more at home," he said.
The tax details are expected to be contained in a separate publication after the mini-budget, once the Congress agrees how to fix the divisive Obamacare health insurance law.
"For budget purposes we have to do healthcare before we do a tax cut," Mr Trump said, "because we have to know what the healthcare is going to cost".