That is a fallacy. The federal government collects roughly 20% of GDP as taxes. That 20% is built into the cost of goods and services. It doesn't matter how you collect it, you are still effectively raising the price of everything by 20% to cover the tax burden. The foriegn import does not have the 20% US tax burden to bear, it takes that 20% as a bonus.
Consider a Ford SUV selling for $20,000. $4,000 of that is going to the government from taxes paid by workers, investors, suppliers, Ford Motor Corp, etc. Meanwhile, on the Honda SUV imported from Japan selling for the same $20,000, most of that $4,000 heads back to Japan. Under the Fair Tax, the Ford would sell for $16,000 and at the time of sale the consumer would pay $4,000 in taxes. To compete, the Honda would also sell for $16,000 and the buyer would pay $4,000 in taxes. Under an income tax system, the government would only collect roughly $5 to $6 thousand dollars for the sale of these two vehicles. Under the fair tax system, the government would collect $8,000. So, under the Fair Tax system, the US consumer would not pay a nickel more in taxes than they already do, however government revenue would increase, lowering our debt. The trade deficit would shrink. Foreign competitors would lose a huge advantage, American labor would become much more cost effective and in general, our economy would boom.
“Under the Fair Tax, the Ford would sell for $16,000 and at the time of sale the consumer would pay $4,000 in taxes”
I can’t see prices being lowered by business owners, at least initially. I think that once they don’t have the tax burden, they will look at it as bonus income. Maybe over time prices would be reduced due to competition, but I just can’t see them coming down that much that quickly.