Analysts said there may be volatility coming in March as the U.S. Trump administration is set to introduce tax reform and border adjustment tax plans. In particular, the adoption of the border adjustment tax would likely cause negative repercussions on Korean exporters.
Park Sang-hyun, analyst with HI Investment & Securities, said, "The border adjustment tax may affect the nation's stock, bond, and foreign exchange market in significant ways. Countries with a high degree of reliance on the U.S. market for their exports, including Korea, would be hit hard by the introduction of border taxes."
The border adjustment tax is a scheme advocated by the Trump administration by which the government imposes 20-percent corporate tax on goods and services imported to the United States while giving tax-free privilege to goods and services exported overseas.
Park of HI Investment expected the tax to have negative consequences for the U.S. economy at least in the short run. He said, "There is no way around for prices to rise as the tax benefits on import goods disappear. Of all goods imported to the United States, the ratio of consumer goods against industrial goods is 27 percent versus 20 percent."
He also said that the tax scheme would have an impact on the U.S. Fed's interest rate policy as well, saying, "It would be hard for the monetary policy makers to raise the interest rate in the face of rising inflationary pressure."
He predicted that the border tax would influence Korea's export industry in a negative way. "The price competitiveness of Korean export items to the United States would be weakened significantly, especially items such as automobiles, wireless devices, and semiconductors that account for about 50 percent of all exports."