Over the last year, the value of the U.S. dollar has climbed to unprecedented levels. In September 2022, the dollar went to a two-decade high while other currencies reached record lows. Especially in emerging markets where currencies like the Turkish Lira have lost much of their value compared to the dollar. More common coins have also seen a discrepancy, such as a euro, with one euro buying around 0.97 dollars today. The value disparity compares to the same amount of euros buying $1.17 a year ago. The dollar’s strengthening is due to the Federal Reserve’s hike in interest rates.
The hike attempts to repress inflation rates which are also soaring. Recent figures have shown the cost of buying everyday items like food has risen over 10% compared to last year. When interest rates rise, foreign investment becomes more popular, increasing the demand for a currency and its value. While many advantages arise from a strong currency, there may also be disadvantages. A drawback is that U.S. companies may have difficulty selling their goods overseas because it is more expensive. The surge has also had a massive effect on international shipping to and from the U.S.
How is Importing and Exporting from the U.S. Impacted
A strong dollar directly impacts global trade, and the amount of cargo moved into and out of the U.S. As previously mentioned, the increase in interest rates heightened the dollar’s value. When a currency strengthens, the imports into the country of the currency increase. The cargo brought in rises because the cost of importing goods decreases. This is ideal for businesses in the U.S. that buy goods from other countries and ship them over. Another benefit of lowering imported goods’ prices is that it can control domestic inflation. Inflation slows down because every dollar may be able to purchase more goods.
While the dollar’s rising value can increase imports into the U.S., the number of exports can decrease. This is due to the growing cost that an importer from another country must pay for a U.S. good. An example can be a company in India buying several products in the U.S. worth $1000. If the dollar’s value rises to a certain amount, that $1000 will equal fewer products. The number of products may lower even further since the value of other currencies, such as the rupee, is decreasing. On a large scale, this can reduce the number of exports from the U.S., considering the depreciation of other currencies.
With the dollar currently at solid levels, it may be a perfect time for U.S. shippers to import goods. However, the shipping process is complex and may confuse first-time shippers. A third-party logistics company can help because they handle the shipment for the shipper. Contact A1 Worldwide logistics at 305-821-8995 for assistance with shipping your freight. We have freight forwarders for cargo transportation and customs brokers that assist with the clearance of goods entering the U.S. Whether you are importing or exporting to and from the U.S., we find the best quote for moving your shipment.
