"It could lead to a lot more jobs in the United States," Trump told Reuters in an interview, using his most approving language to date on the proposal.
Trump sent conflicting signals about his position on the border adjustment tax in separate media interviews in January, saying in one interview that it was "too complicated" and in another that it was still on the table.
The proposal has divided American businesses. Critics say the planned 20 percent tax on imports could be passed along in higher prices to consumers, including manufacturers that rely on imported goods to make their products.
Some critics have warned of a potential global trade war which would sharply curtail U.S. and world economic growth.
Advocates say U.S. exporters will gain as their revenues will be excluded from federal taxes. They say the tax on imports will encourage domestic production and cause the already strong dollar to rise, offsetting upward pressure on import prices.
COMPANIES 'TO COME BACK'
Trump has also called for a 35-percent border tax on U.S. companies that move jobs abroad and import products back into the U.S. market. It has been unclear in the past if those references referred to the border adjustment proposal.
"I certainly support a form of tax on the border," he told Reuters on Thursday. "What is going to happen is companies are going to come back here, they're going to build their factories and they're going to create a lot of jobs and there's no tax."
White House spokesman Sean Spicer also came to the defense of border adjustment on Thursday, disputing the claim that it could lead to higher consumer prices. "That benefits our economy, it helps American workers, it grows the manufacturing base," Spicer told reporters at a White House briefing.
The Mexican peso MXN= weakened slightly against the U.S. dollar immediately after Trump's comments and was last trading at 19.68 per dollar. Earlier on Thursday, the Mexican currency hit its strongest level since Trump's Nov. 8 election victory.
Stocks of retailers, which could be hurt by border adjustment, weakened on Wall Street after Trump's remarks. The S&P 500 retailing index .SPXRT ended down 1 percent. Shares of Wal-Mart Stores (WMT.N) slipped and closed down 0.6 percent. Trump said his administration will tackle tax reform legislation after dealing with Obamacare, the health insurance system that his fellow Republicans have bashed since it was put in place in 2010 by his predecessor, President Barack Obama.
Earlier on Thursday, Treasury Secretary Steven Mnuchin told CNBC the Trump administration aimed to formulate a tax plan with support from the Republican-controlled House of Representatives and Senate and pass it before August.
Lawmakers and corporate lobbyists say the border adjustment tax could die in Congress, potentially jeopardizing the prospects for tax reform, mainly because of opposition from a handful of Senate Republicans.
But experts say Trump's endorsement could change the political climate. "If Trump supports it, that makes it considerably more likely," Harvard Business School professor Mihir Desai told Reuters.
Trump's comments were followed by dueling statements from lobbying groups.
A statement from the pro-border adjustment American Made Coalition said the White House was "sending its strongest signals yet that it’s leaning toward supporting the House blueprint with border adjustability."
The Americans for Affordable Products coalition that opposes the border adjustment tax issued a statement saying Trump’s remarks were "consistent with what he’s already said" and that it was "impossible" to know if they were specific to any individual legislative policy.
Trump spoke to Reuters after meeting with more than 20 chief executives of major U.S. companies to discuss ways to return manufacturing jobs to the United States, one of the linchpins of his 2016 presidential campaign.
Many CEOs of large multinationals back the border adjustment tax. The chiefs of 16 companies, including Boeing Co (BA.N), Caterpillar Inc (CAT.N) and General Electric Co (GE.N), sent a letter to Congress on Tuesday urging support for it.
A border adjustment has emerged as the most controversial segment of the House Republican tax reform blueprint. Under the House plan, it would raise more than $1 trillion in revenues to help pay for a corporate tax cut.