A Weak Dollar Saves US Exports
Might the US eventually become a low cost country sourcing destination of choice for Western Europe and Japan? Most likely not, though it's humorous to ponder the idea, especially given the steady decline of the dollar against virtually all global currencies in recent years. Further, there's proof that the weak dollar is propping up US exports already. Last week, the Commerce Department released data which showed that "The U.S. trade deficit unexpectedly narrowed for the third straight month in November, to the lowest level in 16 months." According to the report, domestic exports rose nearly 1% in November, primarily due to increased global demand for US commercial aircraft, automobiles, and telecommunications gear.
The linked article also points out -- to my statement earlier -- that "a decline in the dollar, which makes U.S.-made goods cheaper abroad, could be contributing to the rebound in exports. Last year, the dollar fell 3.8 percent against a trade-weighted basket of the currencies of its biggest trading partners." One wonders if the US lowered its ridiculous export constraints on any intellectual property and products deemed to be potentially damaging to US defense interests how much more exports could rise given the weakness in the dollar.
Jason Busch
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I'd reckon that you'd make a great Tuk-Tuk driver in my home town should we ever go down that path!
I was writing about the decline in the US$ exchange rate last week - though the idea is really relevant across any traded commodity that has an impact on your purchasing. The example I used was the US$ decline has had the effect of over-pricing goods in Canada purchased from the US. As an example, like-for-like vehicles are running, on average, about 17% more expensive in Canada. As buyers you need to understand the impact of commodity prices (including currencies) on your trading partners. I wrote "If you’re not benefiting from exchange rate/price arbitrage, odds are good that your supplier is benefiting. As always, market knowledge can go a long way to evening the odds, so don't just look locally for price benchmarks; your suppliers view their markets globally, so should you."
Cheers,
David Rotor