The Inflation Effect for Import and Export Businesses: How A Weaker Dollar Will Benefit Some and Limit Others

Feb 24, 2023 | Future in Logistics, Supply Chain Problems

Inflation is par for the economic course—but, coming out of the pandemic, the accelerated rate of inflation hit the shipping and logistics industry hard. Not ideal considering the two-plus years of slowdowns, shortages, and other massive hits we’d just navigated.

While inflation has, thankfully, slowed a bit over the last few weeks and months, all signs still point to a weaker dollar by the end of 2023. But it’s not all bad news. Yes, a weaker dollar threatens the profitability of stateside imports—but exports directly benefit. With the dollar declining, we’ll no doubt see global organizations looking to leverage a suddenly-favorable exchange rate. 

But what about small businesses operating on thinner margins? A weaker dollar artificially inflates the cost of moving cargo. Accounting only for fuel, even—excluding payroll, food, and other expenses—we can expect shipping costs to be impacted. And while it’s possible to mitigate some of these challenges, it’s even better for SMBs to build out partner relationships—ideally with partners like OL-USA who can tap into massive global networks, keeping costs in-check.

How a weaker dollar impacts imports and exports

Taking a step back, it’s easy to see the impact of inflation—and a weakened dollar—on the entire supply chain. A weaker dollar can significantly impact household spending, particularly in key retail segments, including luxury goods and other more discretionary categories. As consumer spending stalls, these businesses may be more apt to pause on hiring, curb raises and bonuses, or delay other organizational investments—think in-store updates or associate training. The longer spending slows, the more likely companies are to consider cost-cutting measures, and even layoffs, which impact unemployment and can slow economic growth even more. 

From this perspective, it’s easy to see the trickle down: consumers spend less, demand shrinks, and every player in the global supply chain takes a hit, from manufacturers producing less to logistics teams dealing with decreased retail cargo. And if there are significant layoffs and a growth in joblessness? Those declines can quickly move beyond luxury and discretionary retail and into everyday needs and purchases, impacting the supply chain even more. 

Export versus import challenges—and upside 

All of this said, a weak dollar tends to have a more significant impact on importers—and, in many cases, can be a win for global exporters. Heightened inflation typically syncs with the exploitation of natural resources—and is often associated with reduced exports and slower growth. Again, consider the typical inflation/supply chain trickle down: inflation rises and, with it, the cost of goods and services increases, fuel costs surge, and shipping costs skyrocket. 

A weak dollar, then, makes it costlier to import international goods, driving up the cost of imported parts and products—fuel costs rise, demand dips, and shipping costs increase. 

But then there’s the flip side. A weaker dollar, again, can have a direct and extremely positive impact on exporters. The more favorable exchange rate is a direct bottom-line booster. Less costly goods and services may also translate to increased production and market share, increasing profits even more. Imports, then, become the costlier option, continuing to stimulate the export market.

And when the dollar rebounds? The landscape flips with appreciation. As the exchange rate increases, the relative cost for U.S. goods and services increases, and the relative price of international goods and services drops. As a result, prices on U.S. exports decrease and imports increase. 

The impact of government “course corrections”

The direct impact of inflation and a weakened dollar, though, are just part of the equation. Layer on the potential for heightened interest rates or other government reactions to these economic forces, and shipping and transport costs may spike even more—and the cycle continues

Often, as inflation rises, governments attempt to slow things down. One common tactic? Raise interest rates. Higher interest rates make it more expensive for businesses to borrow money, which can affect their ability to invest in new projects or expand operations. This, again, can wind up stalling the economic growth even more. Less business capital can mean fewer jobs, less innovation, and a decrease in new products and services entering the market. 

Governments may also implement policies that restrict imports or exports, with an eye on controlling supply and demand. While meant to support domestic growth, these policies can have unintended consequences, including lower demand and, with it, reduced consumer spending. This, then, can have significant impact on the retail and supply chain industries—and, again, the cycle continues. 

Maintaining healthy margins in any climate 

The reality? The global economy is an almost-constant—and supply chain leaders need to develop systems and processes for maintaining consistency and cost savings, no matter the immediate climate. 

Working with a logistics provider can help organizations stay ahead of changes in the market, and respond to new challenges in real time. From optimizing carrier rates and shipping budgets to identifying potential slowdowns and strategizing workarounds, the right partner can ensure your organization has the access, efficiencies, and direct connections to keep moving forward. 

Stay ahead of economic challenges—OL-USA can help. Get in touch to learn more.

Sign up for The Saturday Shipper

It’s a weekly newsletter that breaks down all of what’s happening in the shipping industry. We promise to only send it out once on Saturdays!

Take me there!

U.S. and China agree to slash reciprocal tariffs in major step toward easing trade war

The U.S. and China agreed to a 90-day pause on most tariffs, easing tensions in their ongoing trade war and boosting global markets. The U.S. will reduce tariffs on Chinese goods...

Trump set to unveil ‘full’ US-UK trade deal, first since ‘Liberation Day’ tariffs

President Trump is set to announce a comprehensive trade deal with the UK, marking the first such agreement since his administration imposed and then paused broad "reciprocal" tariffs in April. Trump emphasized the longstanding alliance with...

China eases tariffs on select US goods as Trump says Beijing will ‘eat’ the costs

China is quietly exempting select U.S.-made goods from its steep 125% tariffs to ease trade tensions while preserving a tough public stance, focusing on sectors like semiconductors and pharmaceuticals. In contrast, President Trump has...

What’s in Trump’s move to ease US automotive tariffs

Tariff Stacking Removed: Vehicles and parts hit with the new 25% Section 232 auto tariff will no longer face an additional 25% tariff on steel, aluminum, or certain imports from Canada and Mexico. However, tariffs on Chinese imports (up to 145%) and the standard 2.5%...

Trump’s autos tariff relief aimed at reshoring production to US, Lutnick says

On April 29, President Donald Trump is set to sign an order offering temporary relief from his 25% vehicle tariffs to automakers producing in the U.S., allowing time to reconfigure supply chains. The relief includes credits for...

Imports from China now face tariffs of up to 245%, White House says

The U.S. is imposing tariffs as high as 245% on Chinese imports due to national security concerns and China's retaliatory actions, including rare earth export restrictions. These tariffs include a 125% reciprocal...

Trump tariffs on China will soon bring ‘irreversible’ damage to many American businesses

President Trump’s decision to exempt Apple’s iPhone and other tech products from new China tariffs offered limited relief, as the broader U.S. economy, especially small businesses, faces growing strain from a sweeping 145% tariff...

China strikes back with 125% tariffs on U.S. goods as trade war intensifies

China has sharply raised tariffs on U.S. goods to 125% in retaliation for President Trump's recent tariff hikes, which now bring the total U.S. tariff rate on Chinese imports to 145%. Beijing criticized...

Trump temporarily drops tariffs to 10% for most countries, hits China harder with 125%

President Donald Trump announced a 90-day pause on new tariffs, reducing them to 10% for most U.S. trade partners to allow for trade negotiations. He also raised tariffs on Chinese imports to 125%, citing disrespect towards global markets. Following the announcement,...

Trump’s reciprocal tariffs plan kicks in; China vows again to impose countermeasures

President Donald Trump's tariffs are now in effect, including a projected 104% tariff on imports from China. On Tuesday, U.S. Customs and Border Protection announced that it was ready to start collecting country-specific tariffs from 86 trading partners at 12:01 a.m....