Tariffs and a strong dollar: What it Means
There are many terms and concepts that are brought up but not explained in the news, so today I will try to shed some light on what the terms mean and the ultimate connections between them.
When our dollar is strong it means we can buy more imports for the same dollars and it becomes cheaper to travel outside of the U.S. It also means that the products we produce and export are more expensive for the buyer and fewer tourists from foreign countries will vacation in the U.S.
When we put tariffs on products being imported into the U.S., that inspires U.S. buyers to purchase products produced in the U.S. if they are cheaper than foreign goods. The problem is that many products are made by foreign raw materials and a good substitute may not be available domestically. This may result in the products being produced here may go up in price, resulting in the possibility that there will be fewer buyers.
If foreign countries also impose tariffs, this decreases buyers of our domestically produced goods. Between export tariffs being imposed by foreign countries (decreasing export demand), import tariffs on foreign products (increasing some raw material costs), and a strong dollar (decreasing exports, increasing imports, decreasing domestic tourism, increasing foreign tourism), this all can decrease demand for our products which can then increase unemployment and decrease GDP-potentially causing a recession.
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