Trump, The Dollar And Trade – What’s Ahead

it’s particularly valid. The one thing we know is that Germany has been running surpluses, in the long run, for many decades now. They’re incredibly competitive. People love their goods. And so, whatever the exchange rate is, they seem to do well. So, I think in this case, the issues raised by Trump are not particularly valid.

[email protected]: What do you think is going to happen to the dollar over the next year or two, given pressures I mentioned, at the outset, that suggest that the dollar would go up, at least somewhat? And then, the opposite pressures, at least so far, of the new administration, suggesting they want a softer dollar, and also kind of saber-rattling against our trading partners, when it comes to the currency, in the hopes of improving the U.S. trade position.

Allen: I think a lot of things are already priced in, that you’ve discussed. The one thing that we do definitely know is that forecasting exchange rates is one of the most difficult things to do. And there are not many people that can do it very well, and I’m certainly not one of them. I wouldn’t be surprised if the dollar strengthened, but I also wouldn’t be surprised if it weakened. I think there’s just so many things that can happen, in terms of the Trump program, that can make it move either way. There are some trade issues that we haven’t seen play out very much yet, particularly with China.

“Exporters, like Boeing, and so forth, are going to do wonderfully well. And the importers, like Walmart, are going to do pretty badly, in terms of their taxes.”

But there are also a number of other things, like security issues, and so on, and how Congress reacts. What they do about these border taxes that we talked about, and so forth. There are just so many things. It would be very difficult to project what’s going to happen.

[email protected]: Is there’s anything else you want to bring up in connection with all of this?

Allen: This issue about the border tax — of making exports non-taxable, and imports non-deductible — is potentially a big thing. Republicans seem to be pushing that hard in Congress, but it’s not quite clear what Trump thinks about it. But that could drastically change a number of things. One would be the dollar, but also, the relative positioning of firms will change quite a lot, I think, if anything like that happens. We’ll see whether it does. How the World Trade Organization will react to that is also up in the air, I would say. But I think that’s a big issue.

[email protected]: When you say it could bring big changes for firms, could you describe, just in broad strokes, what some of them are?

Allen: Well, the exporters, like Boeing, and so forth, are going to do wonderfully well. And the importers, like Walmart, are going to do pretty badly, in terms of their taxes. So, that’s one aspect. Whether or not it will change how they proceed, in terms of importing less and exporting more, I think, is an open question. I’m not sure how much of the effect there will be.

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