Why a weakening U.S. dollar can help the consumer

The dollar fell to its lowest level since December on Wednesday as investors anticipate Federal Reserve Chair Jerome Powell's speech at the Jackson Hole economic conference in Wyoming.

The dollar has consistently been trending downward in August. In 2022, the dollar reached its highest level since the early 2000s, after experiencing a decade of sustained growth.

"I actually don't like the word strength because that has positive connotations," said Matthew C. Klein, co-author of "Trade Wars Are Class Wars" and founder of The Overshoot, a subscription research service on the global economy. "Really what we just mean is that it's more expensive relative to where it was before. So dollars can buy more foreign things than ... before, and that's obviously good if you want to buy those things."

The dollar's value depends on economic conditions in the U.S. and around the world, so it's difficult to label a strong dollar as simply good or bad overall.

"The power projection of the United States is greater when the U.S. dollar is strong, and as the U.S. dollar becomes weaker, it's less capable of projecting political power," said Harold James, professor of history and international affairs at Princeton University.

A strong dollar can also have its downsides. It's possible that demand for U.S. goods abroad would decrease if international consumers can't afford to buy those goods. American workers could then be negatively impacted. 

"The people who benefit from the strong dollar are usually different people than would benefit from the weak dollar," James said.

As a result of that negative feedback loop, the U.S. president doesn't always want a strong dollar. For example, former President Donald Trump expressed concern prior to Covid