11/27/18
Greg Owens wants to sell his company’s stainless-steel flatware to customers in Britain and Australia. Only one thing stands in his way: the strength of the U.S. dollar.
Owens’ company, Liberty Tabletop, the last stainless steel flatware maker in the United States, produces its distinctive offerings in a century-old brick building in Sherrill, New York. Each time Owens converts the sales price of competing products in those overseas markets into dollars, he flinches.
“When I’m at a 20 or 30 percent disadvantage versus my competitors’ prices, I have no chance — and that’s pretty much what’s happening,” he said. “If that were somehow to be corrected, it would go a long way to helping us be more competitive.”
Owens’ frustration stems from President Donald Trump’s approach to shrinking the U.S. trade deficit. Trump promised during the 2016 campaign that he would act against China for manipulating the yuan’s value, and he repeatedly has called the dollar “too strong.” But he has taken no direct action on currencies, instead relying on tariffs to battle trade barriers that he says hurt American companies.
Trump’s “America First” stance has yet to make a dent in the merchandise trade deficit, which hit a monthly record in September. Amid signs that the rising dollar is depressing U.S. exports — and muting hiring growth in a handful of industrial states — some labor and business groups are calling on the president to take action to weaken the U.S. currency. Yet his economic policies are making it stronger.
“The trade deficit is a function of the dollar, not a function of bad trade practices abroad,” said Brad Setser, who was a White House and Treasury Department economist in the Obama administration. “But the basic problem the administration faces is, its own tax policy and fiscal policy is driving the dollar up.”
The dollar has risen more than 7 percent this year against the currencies of major U.S. trading partners, part of a 22 percent gain since the end of 2013, according to the Bank of International Settlements index.
A stronger dollar acts as a price increase for U.S. goods sold abroad while making imported products less expensive for Americans. The greenback’s effect can be glimpsed in Liberty Tabletop’s near-exclusive focus on domestic sales as well as government statistics showing that, excluding oil, U.S. exports of goods in September were lower than they were four years ago.
Currency values have had an especially pronounced effect on U.S.-China trade, which accounts for nearly half of the annual $800 billion U.S. deficit in goods trade. For more than a decade after joining the World Trade Organization in 2001, Beijing intervened in foreign exchange markets to keep the yuan artificially low. That boosted Chinese exports, often at the expense of American manufacturers, and contributed to the hollowing out of Midwestern industrial states that Trump won in 2016, economists say.
Between 2001 and 2017, Chinese trade destroyed 3.4 million American jobs, three-quarters of them in manufacturing, said economist Robert Scott of the union-backed Economic Policy Institute.
“The single most important cause has been currency manipulation and currency misalignment,” said Scott, who said other U.S. trading partners, such as Japan, the European Union and South Korea, also have benefited from artificially low currency values.
Other economists say the trade deficit is linked to broad economic forces, such as a relatively low national savings rate.
China no longer intervenes as routinely in currency markets, doing so only to prevent overly swift or destabilizing moves in the yuan, economists say. As a result, the People’s Bank of China’s dollar reserves are 9.7 percent, or $124.2 billion, lower than they were in January 2014.
Still, since April, the yuan has dropped 9.5 percent against the dollar, eroding the 10 percent and 25 percent tariffs that Trump has imposed on Chinese goods.
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https://www.thegazette.com/subject/news ... s-20181127
This article claims that we aren't yet feeling the full effects of the 10% - 25% cost increases brought on by the tariffs because the US dollar is [artificially] strengthening against the Yuan, offsetting much of the cost increases. If you believe we are inflating our currency, building another bubble, and heading for another eventual correction/crash/recession (seems likely), the difficulties many US companies are already experiencing as a result of the US tariffs on China (and the retaliatory Chinese tariffs on the US) will surely multiply when the currencies start moving the other way.
