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The euro impact on small businesses

Euro affecting small businesses
Posted at 11:32 AM, Jul 29, 2022
and last updated 2022-07-29 14:55:39-04

For the first time in 20 years, the US dollar is as strong as the euro.

There are pros and cons to this news that can affect US businesses.

“When the dollar is increasing its value, foreigners find it harder to buy US products because they’ll have to pay more,” said Kishore Kulkarni, a professor of economics.

Because the dollar is as strong as the euro, that means your dollar is going to go a little bit further when you visit Europe.

However, on a bigger scale, the euro being just as strong as the dollar can affect American exports.

“So, our exports get affected a great deal,” Kulkarni said. “We don’t export to the rest of the world, but the EU and UK are big importers of us. Our purchase of European goods is pretty significant. Now that our dollar value is much higher, we don't mind being more European goods. The cars, for example, the perfume, the groceries, everything we buy from Europe is going to be cheaper – 20% cheaper."

When it comes down to it, it’s even affecting small businesses.

The European Market and Deli located in Denver primarily sells European products.

"We see a lot of increase in prices of flour and a lot of other products we use in the store,” said Kristiyan Mirkov, the owner of European Market. “Some products are over 200% more expensive; a bag of flour was $8 to $9 dollars and it's $20 to $25. I don't think the dollar is strong. I think the euro is weak with everything going on with COVID and the war in Russia cause Europe relies on Russian gas."

Businesses that import European products can see slight savings in the actual products, but transportation and shipping are still expensive.

"Distributors are increasing their prices,” Mirkov said. “And we are a little bit further on the chain, so if we want to stay open, we have to increase prices as well."

While the euro’s value decreasing is a little beneficial, businesses like Mirkov's are still hurting when it comes to the cost of shipping because of fuel.

According to economists, fuel prices and the euro are directly connected. The European Union moved to wean itself off Russian oil.

"Crude oil has messed up the gasoline prices,” Kulkarni said. “In fact, some EU countries are considering having a ration on gasoline and that is a serious business. That's why the euro has gone down equal to one dollar."

Small businesses like the European Market will see more of a savings when the euro can be brought back up, because the war in Ukraine is affecting fuel costs.

"We don't import directly, and we work with US-based distributors,” Mirkov said. “The transport price got expensive for them, and you know it got more expensive for us as well."