Trump’s Weak Dollar Policy Could Hurt Stocks

Donald Trump’s support for a weaker dollar has the potential to torpedo a key tax-reform proposal that has served as one of the main catalysts of the U.S. stock market rally.

The so-called border-adjustment tax favored by Republicans in the House of Representatives is basically a charge on imports into the U.S. that was supposed to be partly offset by a stronger greenback. The absence of a stronger dollar to serve as a counterbalance against the likely resulting inflationary pressure from the tariff seems to make the tax a less of a possibility.

“I wonder if [Donald Trump’s] observation about the strength of the dollar is a backhanded downgrading of the possibility of the border-adjustment tax — at least as proposed in the Paul Ryan plan,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman in New York. “That plan would theoretically lead to a stronger dollar. So you just think the dollar’s strong now.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza