It appears that the strength of the dollar in recent months due to the Euro crisis is already starting to take its toll on U.S. international competitiveness. It is not just that our trade deficit with Europe is deteriorating, rising to $7.8 billion in June from $6.2 billion in May. Our companies compete directly with European companies in many third-world countries.
For example, General Electric (NYSE: GE - News) and Siemens (NYSE: SI - News) of Germany both make products like MRI machines. If the value of the euro falls 10% against the dollar, then Siemens can easily undercut the price it quotes to a Chinese hospital that is interested in upgrading its medical imaging department, and thus get sales that might have otherwise gone to GE. China is, of course, our largest bilateral trade deficit, and it increased to $26.2 billion from $22.3 billion in May.
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