Saturday, November 16, 2024

Strong Dollar - Big Deal?

Impacts of the American dollar relative to other world currencies depends.  It holds advantages for some and disadvantages for others.  Let me explain.

If the dollar has strengthened - for most American consumers this is a good thing.  If I am planning another family vacation travel abroad becomes less expensive.  Imported goods sold in the American market place are less expensive.  What's not to like, eh?

However, imagine I am an American manufacturer and rely significantly-upon global markets  to sell my product(s).  As the dollar strengthens, my product is less competitively-priced overseas and this can impact sales and profits.

So, you're likely scratching your head and wondering why this is a big deal.  

It is kind of a big deal as the dollar has reached a one-year high against our peer currencies.  Ironically, a consequence of traders betting on Donald Trump's Secret Sauce of trade tariffs, tax cuts and deregulation stimulating economic growth.  Trump's plans appear to be pouring gasoline on the fire he doesn't want.  He obviously wants a weak dollar which would buoy US exports.

This is complicated stuff and a simple Only I Can Fix It with a blunt shillelagh of tariffs isn't necessarily going to work.  This calls for nuance and incrementalism.

If you want to know how this is working out keep your eye on the dollar.

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