(Bloomberg) -- Sweden’s new trade minister says there’s little reason for exporters to fear a stronger krona as the currency trades around its weakest levels in roughly a decade.
Anna Hallberg, who started in her new job last month, says the calculus that once meant exporters would benefit from a weak currency is starting to wear thin. That’s because most businesses now rely on foreign sub-components, which go up in price if the krona weakens.
“We shouldn’t be too afraid that a strengthening of the krona would hurt exports directly,” Hallberg said in an interview in Stockholm. “It’s rather the international trade conflicts, and the global downturn we should prepare for.”
“A third of our export products are dependent on imports,” she said. “So there are two sides to it.” Hallberg also said it’s “obvious” that Sweden is experiencing an economic slowdown.
Sweden generates about half its economic output from exports. That means the largest Nordic economy is particularly exposed to the fallout of a global trade war that now threatens to engulf the European Union. The World Trade Organization recently gave U.S. President Donald Trump the go ahead to impose duties on as much as $7.5 billion of EU exports -- the biggest award in WTO history -- as retaliation for illegal state aid that EU governments paid to Airbus.
Hallberg characterized the decision as regrettable and said it would have been better if the U.S. had opted for dialogue. “Now we are forced to respond to the U.S.’s hard line and defend ourselves,” she said. “It’s very unfortunate.”
Hallberg signaled that the EU would draw the line at any U.S. steps against its car industry. Such a development would be something the EU absolutely “can’t accept,” she said.
The minister also pointed to Brexit as a near-term threat, even if a deal is reached.
“There will be more trade barriers and it will also take some time before a new deal is in place,” Hallberg said. “So we are really urging companies to prepare themselves.”
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