US: Mnuchin’s attitude on BAT reveals a preference for a weaker USD - AmpGFX

The WSJ reported that Mr. Mnuchin said the administration is “looking seriously” at the House plan that includes border adjustment and was well aware of concerns raised by specific industries notes Greg Gibbs, Director at Amplifying Global FX Capital.

Key Quotes

“The Treasury Department had its own concerns, he added, “about what the impact may be on the dollar” from a border-adjusted tax.”

“(A BAT is under serious consideration, but Mnuchin prefers if it didn’t boost the USD.)”

“A Border Adjustment Tax (BAT) is widely expected to place significant upward pressure on the USD.  It would significantly shift the fortunes in favor of exporters and import-competing producers, while undermining import dependent companies, including large retailers.”

“As such industry is split and there is fear that it may cause significant economic disruption and inflation.  Nevertheless, it should tend to boost demand for US producers, lift employment and capital investment, narrow the trade deficit and boost national GDP; all key goals of the Trump Administration (and arguably any government).”

“However, to the extent that the policy drives up the USD, many of these potential benefits of the policy may diminish.”