Why a stronger dollar is dangerous

It sets the stage for a nasty new Trump-China clash, among other things

Apr 23rd 2024

the world is on the verge of a new period of strong-dollar geopolitics.

By the end of 2023, America’s economy was 8% larger than at the end of 2019. Those of Britain, France, Germany and Japan each grew by less than 2% during the same period. The yen is at a 34-year low against the dollar. The euro has dropped to $1.07 from $1.10 at the start of the year (see chart 1).

미국
A strong dollar tends to raise the price of American exports and lower the price of imports, widening the country’s persistent trade deficit

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Elsewhere, a mighty greenback is good for exporters that have costs denominated in other currencies.
인플레이션
But high American interest rates and a strong dollar generate imported inflation, which is now exacerbated by relatively high oil prices.
대외부채
In addition, companies that have borrowed in dollars face steeper repayments.

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Many countries have ample foreign-exchange reserves that they could sell to bolster their currencies: Japan has $1.3trn, India $643bn and South Korea $419bn.