Mnuchin takes a BAT to the dollar – AmpGFX

Greg Gibbs at AmnpGFX provides an in-depth understanding of yesterday’s Mnuchin’s take on the Border Adjustment Tax (BAT) and its implications on the US dollar.

Key Quotes:

“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. 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 (as we discussed in our report on Tuesday (EUR feeling pinch, Trump tax policies would boost 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. “