How many businesses do you know that increased their prices 28% last year?
If you answered “we all did“, then you would be right.
At this time last year, a European customer buying $100,000 of your made-in-the-USA products would have viewed that as a €73,000 cost. Today, that same purchase costs your customer €92,000, an increase of almost 30%. For US companies, the strong dollar amounts to a big price increase to their overseas customers. Companies from Apple to P&G to Caterpillar have raised concerns about the impact of the strong dollar on their businesses.
In addition, your overseas sales efforts may be doing great, in local terms. But translate that 15% growth in Europe over the last year to US dollars and the gain turns into a 10% decline. For US corporations with significant multinational operations, that’s a big effect. For companies with exposure to Russia, the effects are even more dramatic. P&G, for example, projects the decline in the Russian ruble will take $550 million off its annual profit.
On the bright side, the dollar doesn’t strengthen in a vacuum. The relatively strong US economy (as compared with our trading partners) is a benefit to US producers and plays a significant role in the relative value of the dollar. So, in some ways, while your business benefits from the improving US economy, it may suffer reduced exports and lower US dollar profits from overseas operations.
How is your business managing the roller-coaster ride of our currency?