If you do importing or exporting you undoubtedly know the answer to this question.
Generally speaking, a weak dollar helps exporters. Why? Because American goods or materials or services are cheaper to overseas buyers, who have to use less of their currency to meet the price.
For those that import materials or inventory, it’s a different story. Greenbacks don’t go as far. It takes more dollars than it did previously to meet the foreign price.
But what if you’re one of the millions of small businesses that do not import or export directly? What does this question mean for you?
In this era of globalization, the question is a lot more complex. I wrote about the weak dollar three years ago, when this issue was also hot on everyone’s radar, noting at the time:
” … [T]oday in an era of globalization, the issues are more complex.
One twist is that there can be hidden currency costs. Say, for instance, the item you are buying from a U.S. distributor was manufactured outside the United States. Or let’s say the raw materials had to be imported somewhere along the supply chain. The prices of goods you buy here in the U.S. from another U.S. seller may have been ratcheted up to cover these hidden currency costs. Those price increases eventually will be passed along to consumers.
Here’s another twist: Even if you are exporting, local suppliers in other countries may be reducing their costs to stay competitive. So, in my example above selling widgets in Italy, if the Italian sellers reduce costs and can now sell their goods for 90 euros, they can undercut my price. My small business’s products no longer have a price advantage.”
How about another twist: retailers, those in the hospitality industry and tourism-sensitive businesses are seeing a boom as foreign visitors follow the lure of bargains in the U.S. — enough to bring them here for a weekend of shopping.
It’s like the Paul Simon song. One man’s ceiling is another man’s floor. Just make sure you know which end is up.
