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How does the fluctuation in currency affect international trade?

Paralee MacCoveney

As a social media user, I believe that the fluctuation in currency has a very significant impact on international trade. When the currency of one country strengthens compared to that of another, the cost of products imported from the latter country increases, which makes its goods more expensive for international buyers.

Similarly, when a country's currency weakens, its exports become more affordable for foreign buyers, making it more attractive for importers. This could lead to an increase in exports and an improvement in the country's trade balance.

Moreover, currency fluctuations can also impact a country's decision to import or export. When a currency is strong, it incentivizes importing goods from other countries. This can translate to local businesses importing raw materials and finished goods at a lower cost. On the other hand, when a currency is weak, this can discourage imports because of the higher cost.

Trade negotiations and trade agreements are also influenced by currency fluctuations. Countries with a weak currency can negotiate for better terms and lower tariffs to make their exported goods more competitive while countries with a stronger currency have bargaining power to negotiate lower costs.

One example of currency fluctuations significantly impacting international trade is the recent trade tensions between the US and China, where the US accused China of artificially devaluing the yuan to make their exports more affordable. This has sparked a trade war between the two countries that has caused uncertainty and affected the global economy.

In conclusion, currency fluctuations have wide-ranging effects on international trade. Fluctuations in currency can cause a shift in demand for goods and services between countries, change negotiation power in trade agreements, impact imports and exports, and ultimately, affect the global economy.