Interview of Nariman Behravesh on the implications of a stronger US dollar.

Interview Transcript

Who are the winners and losers in the appreciation of the US dollar?

Let's focus on the US first. The clear losers are manufacturing exporters, because they've lost competitiveness, and they're going to lose sales at some level overseas. Also, multinational corporations that earn their profits overseas and have to repatriate them will also lose, because those earnings overseas-let's say, euros-are worth less in dollars now because the dollar's stronger. So it hurts the manufacturing sectors and the corporate sectors.

But even in the US, there are winners. The winners are consumers, because their purchasing power has increased. Very specifically, import prices have fallen; they're cheaper now. So that makes the dollar go further for US consumers. In the US, losers on the producer side/export side; winners on the consumer side.

The opposite is the case in a place like Europe. Producers gain, because the euro's cheaper; they gain competitiveness. But consumers lose, because imports are more expensive, and so they lose purchasing power.

So it's not all one or the other, although in the US we tend to focus a lot on the negatives, which is the exports challenge. There are actually winners in the US, as well.

What are the implications of a stronger US dollar over the next few years?

Well, the dollar has gone through some very major swings in the last 30 years. It rose in the mid-'80s to a real strong high. And then it fell again by the late '80s, early '90s. Then it rose again through the late '90s, early 2000s. Then it fell again.

It is now in an upcycle. And this upcycle's probably going to go for another two or three years, easily, because of the strength of the US economy at the very least, and the fact that the Federal Reserve is going to be raising rates before any other central bank around the world.

So, this does mean that there'll be a bit of a drag from trade on US growth. But the good news is domestic demand, internal demand, in the US is very strong. Consumer spending is very strong. So, there'll be something of a headwind. But in the end, it's not going to really hurt growth that much.

Nariman Behravesh is Chief Economist, IHS