We are in an unusual world where — thanks to the lagged impact of the pandemic — the dollar’s strength hasn’t raised import volumes or reduced import prices. It won’t last.
A 10% rise in the dollar usually reduces non-oil import prices by 2-3% (not a ton, true) and reduces net exports (the trade balance) by at least a percentage point. Neither has happened. In fact , import prices are up not down since the dollar’s 2021 rise.
And consumer goods imports are down 15% y/y in q2 even as the USD rose? Permanent breakdown in relationships that have stood the test of time (standard models worked in 15/16)? Or an unwinding of the effects of a once in a century pandemic + associated disruptions?
In fact I would expect currency tensions to rise from here on, as a lot of the investments linked to the CHIPs act and the IRA will struggle for long-term profitability if the dollar doesn’t normalize a bit. Just a hunch.