Former Obama economic aide Treasury Secretary Larry Summers told CNBC on Tuesday the House GOP’s border adjustment tax could have negative ripple effects around the globe.
“If we do the border adjustment, my guess is that the dollar will rise substantially,” Summers said on “Squawk Box.” “The dollar will rise but it won’t rise enough to fully protect the importers.”
Last week, top White House economics adviser Gary Cohn told CNBC that President Donald Trump considers all options for corporate tax reform on the table, including the border adjustment, which taxes imports. The provision is part of the overall House Republican plan to reform the nation’s tax code.
“I don’t think it’s a very good idea because I think it will cause financial problems all over the world because all kinds of dollar debtors will hugely burdened,” Summers told CNBC Tuesday.
Cohn, director of the White House National Economic Council, stressed that no decisions have been made on particular ways to overhaul taxes.
Summers also criticized the administration’s trade policies, saying the Mexican peso has dropped about 15 percent amid all of Trump’s tough talk, which gives “anybody thinking about locating in Mexico … a 15 percent cost advantage.”
He said Trump’s plan to scrap NAFTA has only made Mexico more attractive to US businesses.