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USA: A weaker US Dollar within five years?

10/09/2019 - François-Xavier Branthôme
USA want to restore competitiveness to U.S. exports

President Donald Trump is not the only one who wants a weaker U.S. dollar in order to help American exporters compete with China. A pair of senators have introduced a bipartisan bill to lower the value of the U.S dollar through a tax on foreign investments.

Competitive Dollar for Jobs and Prosperity Act
On 31 July 2019, U.S. Senators Josh Hawley (R-Mo.) and Tammy Baldwin (D-Wis.) introduced a bipartisan plan to make U.S. exports more competitive, boost American manufacturers and farmers, and reduce the U.S. trade deficit. The bill looks to re-evaluate the strength of the dollar to allow U.S. exporters to better compete with other countries, and has the potential for increasing the viability of foreign markets for American produce. The Competitive Dollar for Jobs and Prosperity Act would manage the U.S. dollar exchange rate. According to financial experts, “it would give the Federal Reserve a third mandate, in addition to price stability and maximum employment. The Federal Reserve would have to balance the nation’s current account —a measure of the trade balance — within five years. […] Under the plan, the Federal Reserve could put a “market asset charge” on foreign purchases of U.S. stocks, bonds and other assets in order to realign the American dollar”.

Commenting on the situation, Steve Beck, president and owner of Kings River Produce said “When our dollar’s too strong, it really affects our export availability to be able to export. It can get some pretty violent swings so even though a lot of our processors that we contract with have contracts with foreign countries, if that market swings, that dollar gets too strong, and the foreign countries aren’t able to purchase the product so we lose those contracts.” 
Euro/USD exchange rate over past five years

The strength of the dollar has a more significant impact on commodities such as wheat, barley, and soybeans, but the effect has also been felt in other industries such as processing tomatoes. Beck noted the issue has become more of a challenge in the last five to eight years. “The dollar of the United States has gotten so strong it’s making it really difficult for any export products out of the Central Valley,” said Beck.

New bill aims to weaken US dollar and 'fight back' against currency manipulation
Senator Hawley said, “For decades, China and other currency manipulators have waged financial war on U.S. agriculture and manufacturing to devastating effect. This legislation creates a powerful new tool to fight back against foreign currency manipulators, encourage investment in American jobs, and make our exports more competitive around the world. Our farmers deserve a chance to earn a fair profit on their crops. Our factories deserve a level playing field. With this bill, they will get one.
CNY/USD exchange rate over past five years

For years, foreign actors like China have manipulated their currency, making American exports more expensive and Chinese imports cheaper, forcing our manufacturers and farmers to compete at a disadvantage and blowing up our trade deficit. Today, foreign investors have driven up the American dollar, helping Wall Street profit but holding back stronger economic growth,” said Senator Baldwin. “We need reforms that create a competitive American dollar and an even playing field for manufacturers, farmers and workers. This bipartisan fix will increase American exports and boost our manufacturing and farming economy.”

According to the Coalition for a Prosperous America (CPA), bringing the U.S. dollar into alignment could add nearly USD1 trillion to America’s GDP, create more than five million new U.S. jobs and raise more than USD2 trillion in tax revenue over six years. Michael Stumo, CEO of the CPA, said, “This is a big deal, [which] takes a major stand for working families and says that we will no longer allow the US dollar to be weaponized against America’s Heartland. It’s time to fundamentally change how we view the dollar.” “Dollar misalignment is the key obstacle to America’s manufacturing competitiveness,” said CPA Chair Dan DiMicco. “The past several decades have shown that large foreign capital inflows from central banks and hedge funds are weaponizing the US dollar against American goods, services, and labor.” 

The over-valued U.S. dollar puts American family farmers and ranchers on an uneven playing field with the rest of the world. Despite near record levels of agricultural exports, U.S. farmers and ranchers are now in the sixth year of depressed farm income, and low commodity prices are a big part of the problem. If the U.S. dollar were realigned, our agricultural exports would be more competitive on the world market, driving up prices. The Competitive Dollar for Jobs and Prosperity Act is needed to restore fairness to international trade markets,” said National Farmers Union President Roger Johnson.

Some complementary data
 The full bill text is available at:

See the weekly updates of our “Exchange Rates” heading

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