By Tom Bradley

The strong U.S. dollar is going to be a prominent feature of this quarter’s reporting season. For American companies with a large portion of their business offshore, we’re going to hear Chief Financial Officers pointing to the dollar as a reason for revenue misses and profit declines. When the dollar is strong, business done in foreign currencies translates back to U.S. dollars at a lower exchange rate.

If Canadians are wondering what the impact of the strong greenback will be, we got a hint this week from U.S. consumer products giant Proctor & Gamble. In the company’s earnings release, it said that, “Foreign exchange will reduce fiscal 2015 sales by 5% and net earnings by 12%, or at least $1.4 billion after tax.” The New York Times reported that P&G’s response to the currency challenge will be to reduce costs, shift sourcing and raise prices.

Let’s look at each of these actions through a Canadian lens.

Reduce costs – This will no doubt involve job cuts. Some of these jobs may be in Canada, but there probably won’t be too much pain here unless one of our plants gets singled out for closure.

Shift sourcing – This could be good for Canada. Based on the exchange rate alone, we are 20% more competitive than we were two years ago. If P&G is looking to shift production outside of the U.S., we may be in the running.

Raise prices – Yes, companies like P&G will raise prices to offset exchange rate losses. How much will depend on the competitive situation in each market, but in general, the bias will be for price increases well in excess of inflation. Prices at the pump are going down, but the cost of toothpaste, razor blades and laundry detergent is going up.

In general, the strong greenback means Canada is going to be more competitive, but in the meantime, our standard of living is taking a hit. Economics, as in all aspects of life, is one big tradeoff.