Answer to Question #79702 in Macroeconomics for Samuel Kuffuor-Afriyie

Question

In 2012 the U.S. exchange rate with the European Union was reported as 1.2859 ($/Euro). The rate in 2013 was reported as 1.3281 ($/Euro) (sources: Economic Indicators and FRED). Briefly assess the implications of this exchange rate change for U.S. exports and imports with the European Union.

Answer 1

The USA is the most important trade partner of the EU. The change in the exchange rate is an important aspect of export import ratios.
The change in the rate was accompanied by a more profitable export of goods. At the same time it became unprofitable to buy.
Foreseeing this situation, the US government periodically introduces various import duties from Europe, in order to artificially restrain the flow of goods.
At the same time, the US is the main buyer of European goods and the introduction of duties reduces the volume of exports of European countries, primarily Germany. In this regard, they are forced to seek new markets.
For the US, it is not a problem to replace European goods with Chinese counterparts. Therefore, despite the fact that the Euro is more expensive than the dollar. The US is the leader of these relationships.