11:18 GMT11 August 2020
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    Changes to the US border tax proposed by Republicans in the House of Representatives could have a spill-over effect on other nations’ sovereign currencies, including in emerging markets, and lead to the loss of tax revenues in those countries, Fitch Ratings said in a press release on Wednesday.

    WASHINGTON (Sputnik) — If the tax is enacted, the US dollar would markedly appreciate, though not by the 25 percent necessary to offset the US trade balance, Fitch explained.

    "House Republicans' ‘Better Way’ tax reform proposals, which are a focal point for plans to reform US taxation, would shake up the global tax system, with major implications not just for the US, but also for the rest of the world," the release stated.

    Foreign exporters would lose competitiveness in the United States, causing exports to fall, GDP growth to slow, and account balances to deteriorate.

    The stronger US currency would increase debt-to-GDP ratios in emerging markets that use US dollars, including Argentina, Brazil, Indonesia and Turkey.

    Furthermore, China could exacerbate the situation if it responds with policy changes. These changes would have repercussions and spill-overs to third countries, Fitch said.

    Tags:
    GDP, currency exchange rate, national currencies, United States
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