Weak dollar boost for manufacturers
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Manufacturing News, Source : The Manufacturer US
Published : 26 Nov 2004 10:31
The U.S. dollar has fallen to a record low against the euro and is at its lowest against the Japanese yen in almost five years.
It’s easy to feel hurt by a decline in the value of your currency, but this is, at the present time, just about the only feasible way to reduce foreign borrowing to a sustainable level. The dollar’s fall raises the price of imports, and reduces the price of our exports to other countries, which, for the manufacturing sector, is good news.
As the United States continues to import more than it exports, we are now borrowing nearly six percent of our national income from the rest of the world. The total annual U.S. trade deficit is now running at close to $600 billion. Total imports for the nine months ended September were up to $1.079 trillion from $934 billion in the same period last year, according to the Commerce Department. This is not sustainable.
Since 2000, the U.S. has lost almost 3 million manufacturing jobs, with the overvaluation of the dollar being one of the major causes. It is equivalent to giving a subsidy to imports while at the same time imposing a tariff on everything we export.
Adjusting to a lower dollar will not be painless, as higher import prices can push up inflation. Interest rates may also have to rise to attract capital. But, in the absence of any other good news, it is something manufacturers must take advantage of.
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