This paper has examined some of the reasons why changes in the value of the U.S. dollar
could result in low pass-through to U.S. import prices. This is an important issue for U.S. trade
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competitiveness because if exchange rate changes are fully passed through to U.S. import prices,
such exchange rate changes could result in increased costs (exchange rate depreciation) or
increased competitiveness (dollar appreciation) of domestic producers relative to foreign
suppliers. Some of the economic explanations for low exchange-rate pass-through include
pricing-to-market, dollar invoicing, and global sourcing.