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Strong Dollar Pressures U.S. Manufacturing Rebound


The strengthening U.S. dollar threatens to undermine a rebound in American manufacturing, handing foreign producers an advantage in selling into the U.S., executives and economists said.

The U.S. dollar’s surging value relative to the euro, the Japanese yen, the British pound and other currencies is making foreign-made goods cheaper to import, while exports of U.S.-made goods grow more expensive for foreign buyers. For U.S. manufacturers operating overseas factories, their sales in foreign currencies are worth less in dollars now because of the unfavorable exchange rates caused by the strengthening dollar.

Industry analysts said that unfavorable exchange rates are likely to dent industrial manufacturers’ revenue when they start to report quarterly results later this month. RBC Capital Markets forecasts a currency-related sales drop of 5.1% for conglomerate

3M Co.

, a 3.4% decrease for heating and air-conditioning-equipment maker

Carrier Global Corp.

and a 2% reduction for

General Electric Co.

Representatives for the companies had no comments.

Foreign companies, meanwhile, are gaining a price advantage on exports to the U.S. at a time when U.S. companies have been adding production.

American company Generac imports components for its electricity generators from Japan, Taiwan and other overseas suppliers.


George Frey/Getty Images

Baltimore-based Marlin Steel Wire Products LLC, which makes wire baskets for industrial and medical uses, picked up more work during the Covid-19 pandemic supplying equipment to U.S. hospitals that had previously used suppliers in China. Now, the company is producing mesh baskets for semiconductor plants being built in the U.S. President

Drew Greenblatt

said he added about 50% more floor space at his Baltimore plant, introduced robotic welders and bought another wire-basket company in Indiana late last year to increase production.

Mr. Greenblatt said his European rivals are being held back by soaring energy costs and recession concerns but have pricing power with their imports because of the strengthening dollar. “Our foreign competitors look like they’re having a 10% or 20% sale,” he said.

Since the onset of the pandemic, unreliable overseas supply chains and sky-high costs for shipping caused some U.S. companies to look for domestic alternatives. New factories and production lines have been added to produce more semiconductors, auto parts, aluminum cans and other goods, helping revive the domestic manufacturing sector that lost millions of jobs to China and other low-cost locales during the 2000s.

The dollar’s rise stems from the roaring U.S. economy that followed Covid-19-related shutdowns in 2020 and the Federal Reserve’s efforts to drive down inflation.


Do you think the U.S. dollar is too strong? Why or why not? Join the conversation below.

By aggressively tightening interest rates this year, the Fed effectively drove up the value of the dollar against other currencies, as investors from around the world converted their own currencies to greenbacks to buy Treasury bonds with higher yields. Analysts said the appeal of U.S. bonds has been enhanced by the global disruption caused by the war in Ukraine and the weakness in economies elsewhere in the world.

U.S. companies with significant business operations in Europe are facing falling demand there because of the continent’s weakening economy on top of unfavorable exchange rates. Appliance maker

Whirlpool Corp.’s

second-quarter sales in Europe, the Middle East and Africa fell by 19% from a year earlier, with currency alone accounting for about 9 percentage points of the decline.

Europe and the Middle East account for more than half of sales for farm-equipment manufacturer

Agco Corp.

During the first six months of 2022, unfavorable currency rates wiped out an 8.5% sales gain in the region, leaving the Georgia company with a 3.1% decrease in sales compared with a year earlier. Whirlpool and Agco declined to comment on their exposure to currency fluctuations in Europe.

Diesel-engine maker

Cummins Inc.

said it expects the dollar’s higher value to reduce its 2022 sales by 2% to 3% and decrease operating profit by about 1%. Components imported from its plants in the U.K., India and China and sold in the U.S. will help offset some of the negative effects from sales in foreign currencies, the company said.

The currency shift is helping some U.S. manufacturers that import foreign-made components for use in their U.S. factories. Some executives said they are finding better prices on imports lately because of the dollar’s enhanced purchasing power in countries with weaker currencies.

The dollar is getting stronger. While that may sound like something to be happy about, a runup in the value of the dollar can ripple through the economy in unexpected ways. WSJ’s Julia-Ambra Verlaine explains. Illustration: Jordan Kranse


Generac Holdings Inc.

imports components for its electricity generators from Japan, Taiwan, Europe and other overseas suppliers. “We view the strengthening dollar as helpful to offset higher logistics costs we’re paying,” said

Aaron Jagdfeld,

Generac’s chief executive.

The full effects of the stronger dollar on the company’s imports haven’t been realized yet, Mr. Jagdfeld said, because other expenses for imports remain elevated, including U.S. tariffs on parts imported from China imposed during the Trump administration. “It will take some time to show up in the supply chain,” he said.

Economists expect central banks in other countries to follow the Fed’s lead by raising interest rates in the months ahead. That would narrow the disparity between interest rates in the U.S. and elsewhere, reducing foreign investors’ demand for dollars and causing the value of the dollar to start weakening by mid-2023.

Further downward pressure on the dollar’s value will come from a U.S. trade deficit that increased during the pandemic. U.S. companies ramped up purchases of imported goods to help them meet higher demand for consumer products, ranging from televisions to power tools and recreational vehicles.

“The post-Covid recovery in the U.S. was very aggressive and it sucked in a lot of imports,” said Joel Prakken, co-head of U.S. economics for S&P Global Market Intelligence. He said he considers the U.S. trade deficit, which averaged $1.1 trillion in the first half of 2022 versus $790 billion during the same period in 2021, to be unsustainable as foreign investors’ enthusiasm for acquiring dollars wanes.

Mr. Prakken said he expects weaker domestic demand in the U.S. in the coming months, caused by higher interest rates and a potential recession, to reduce the trade deficit. He said that should help bring down the value of the dollar, along with falling interest rates as inflation abates.

Advocates for U.S. manufacturing said they worry that American manufacturers will become less willing to invest in domestic operations if corporate profits get squeezed by a stronger dollar. At the same time, foreign companies will find it easier to sell their products to U.S. buyers.

“It has a debilitating effect on U.S. companies,” said Harry Moser, president of the Reshoring Initiative, an advisory group for U.S. companies interested in returning foreign manufacturing operations to the U.S.

Write to Bob Tita at [email protected]

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