The strong US dollar is suffocating America’s exports

The trade gap could stand to be a little bigger.
The trade gap could stand to be a little bigger.
Image: Reuters/Thomas Peter
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The latest trade deficit numbers from the US Commerce Department show the dollar is the one part of America’s economy that might be too strong right now.

Imports are growing thanks to a resurgent US consumer. However, the other side of the ledger is another story. The dollar value of both imports and exports are lower than they were last year, down 2.3% and 3.6%, respectively. The real problem is export growth, which has been falling for six straight months.

Some of that is the result of oil prices, as well as the port strike earlier this year. But one of the biggest factors has been the rise of the dollar. In June, the US trade deficit with both the EU and Mexico hit record highs, in part due to the strength of the dollar against those currencies.

The US economy isn’t quite on fire, but it’s doing well enough. That’s put the Federal Reserve on the verge of raising interest rates for the first time in years, which should make the dollar more attractive to investors. Unfortunately, it makes US exports even less attractive to everyone else.