Collateral Damage or Free Rider?

The Week Ahead

February 21, 2017

It’s been a good week for the Canadian economy. Manufacturers posted a surprisingly strong jump in sales. Looking further out, there were some hopeful signs on two of the major downside risks facing exporters.

The border adjustment tax (BAT) embodied in the corporate tax reform plan promoted by House Speaker Ryan looks even less likely to proceed than it did a week ago. Several key Senate Republicans came out in opposition to it. Political pressure is being exerted by US businesses that would be losers due to their import content (retailers and refiners) or the loss of interest deductions (utilities). Markets are putting low odds on its passage, since it would be a huge negative for the currencies of countries with substantial US-bound exports, and instead we’re seeing the C$, for example, gaining ground.

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