Courtesy of Mish.
Donald Trump described the dollar as “too strong” and the yuan as too low. He also went after House Speaker Paul Ryan’s tax plan as “too complicated”.
Trump got the reaction he wanted. The US dollar index declined over 1% from 101.62 to a low of 100.28.
The Wall Street Journal reports Trump Comments Send Dollar Reeling.
The dollar slid to a one-month low Tuesday after President-elect Donald Trump described the currency as “too strong” in an interview with The Wall Street Journal, casting new uncertainty onto the dollar’s postelection rally.
In the interview with the Journal, Mr. Trump said the U.S. dollar was already “too strong” in part because China holds down its currency, the yuan. “Our companies can’t compete with them now because our currency is too strong. And it’s killing us,” he said.
Mr. Trump had alluded to the dollar throughout the presidential campaign, threatening to label China a currency manipulator for weakening the yuan. But Mr. Trump’s comments were the clearest indication yet that the new administration would prefer a weaker dollar.
Mr. Trump also criticized part of the House Republicans’ corporate-tax plan, known as a border adjustment. Analysts had largely expected the plan to tax imports and exempt exports to boost the dollar.
Border Tax Proposal Against WTO Agreements
On January 5, Wall Street Journal op-ed writer Martin Feldstein spoke of the House GOP’s Good Tax Trade-Off.
“Exempting exports from corporate income taxes would strengthen the dollar and raise revenue,” said Feldstein.
The first problem is Trump does not want a stronger dollar. The second problem is Ryan’s “border tax” blueprint is against WTO rules according to University of Michigan research.
Those are not the only problems.
