One of the cornerstones of Donald Trump's campaign was a promise to impose taxes on imports into the US, or border adjustments, in order to buoy America's ailing manufacturing sector.
Traditionally, Republicans have not been in favor of implementing such taxes, but as of late it looks like some key GOP legislators have had a change of heart.
"Recent news suggests House Republicans and President-elect Trump are coming together around [border adjustments]," the bank said.
As such, Morgan Stanley believes border adjustments stand a serious chance in 2017.
However, they don't subscribe to the popular opinion that border adjustments would have a profound affect on FX markets.
"We believe border adjustment would not result in a full exchange rate offset (i.e we don't expect USD appreciation of 25%) ... instead we think a 10-15% rise in USD is reasonable," the bank concluded.