Will Dollar Strength Scuttle U.S. Exports?

In the first of a series of reports, we analyze the effect that the appreciation of the U.S. dollar, which is up 15 percent on a trade-weighted basis since last summer, is likely to have on American exports. For some insights, we examine the 1995-2000 period, when the price competiveness of U.S. exports of goods and services was eroded by the significant appreciation of the dollar that occurred during those years. Despite the 20 percent rise in the real trade-weighted value of the dollar, U.S. exports rose 20 percent during that period because global economic growth remained solid. As long as growth in the rest of the world remains positive in coming quarters, which we expect, then growth in American exports likely will remain positive as well.

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