Strong Dollar – Weak Dollar

The two terms, strong dollar and weak dollar, are generalizations used in the foreign exchange market to describe the relative value and strength of the U.S. dollar against other currencies. Both have their pros and cons and right now, it is an importers market. 

Strong Dollar – One that can purchase more foreign currency, relative to a weak dollar, means that U.S. consumers pay less for imports. Therefore foreign consumers must pay more for U.S. exports.

The Winners

Those who are benefiting most from the strength of the U.S. dollar are manufacturers who rely on imported raw materials. A strong dollar has the ability to lower inflation and ultimately makes imported goods cheaper.

Similarly, retailers who import goods from foreign suppliers are also benefiting from the current strength of the dollar, although not so much on goods imported from China. This is because their currency is contingent to the dollar.

Weak Dollar – One that can purchase less foreign currency, relative to a strong dollar, means that U.S. consumers must pay more for imports from foreign nations. However, foreign consumers pay less for U.S. goods and services, which helps increase production and employment in America.

Not to Everyone’s Benefit

A strong dollar environment does not work in everyone’s favor. U.S. exports to foreign markets are suffering as the cost of U.S. goods and services have inflated. Multinationals with foreign operations are also suffering from reduced profit margins and the same challenges hold true of privately held companies with foreign operations.

So the strong dollar and the weak dollar both have positive and negative effects. Think about it: A strong dollar helps U.S. consumers because it makes foreign goods, which American consumers clearly enjoy buying, cheaper. However it hurts U.S. exports and therefore U.S. production and employment. It also makes the United States a less affordable travel destination for foreign visitors.

Meanwhile, a weak dollar makes U.S. exports and travel in the United States more affordable for foreigners. That helps U.S. production and employment. However, it also raises the price of imports for Americans. This, in a sense, limits U.S. consumers’ choices and can contribute to inflation. It can also shift buying behavior in the favor of U.S. products, which helps the U.S. employment rate.

Here at AFC International, our goal is to help you clear your imports through U.S. customs fast and easy. We can clear your shipments through any major U.S. port, making the customs clearance process simple. The import experts at AFC International have the experience you need for importing your goods into the US.

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