The economist points out that the US dollar started the year 2026 with a marked drop in value, which increasingly clearly indicates a change in trend, rather than temporary market fluctuations.
The dollar has briefly fallen to multi-year lows against the currencies of its major trading partners, while political signals from Washington are also boosting market sentiment.
The US president has publicly expressed support for a weaker dollar, and investors are taking this as a clear signal that pressure on the currency may persist in the long term.
This is not only important for currency markets, Purgailis emphasizes.
According to the economist, a weaker dollar directly affects export competitiveness, pricing and profit margins, so both German and Baltic exporters will inevitably feel its impact.
True, this effect will not be the same – it will be more noticeable in some sectors, less pronounced in others.
Therefore, in Purgailis’ view, the main question is for which companies in the Baltic region the decline in the value of the dollar poses the greatest risks and where it is necessary to maintain special vigilance.
The economist explains that Baltic companies are closely integrated into European value chains, so it is not enough to look only at the local export structure when assessing risks.
No less important is how German industry – the main center of orders and supply chains for many manufacturers in the region – reacts to changes in the exchange rate.
If a weaker dollar reduces the competitiveness of German manufacturers in the US market, this effect is relatively quickly transferred to the Baltic suppliers as well, as the volume of orders decreases.
The analysis of Bank “Citadele” shows that both in Germany and in the Baltic countries, higher value-added industrial sectors – electronics and optics, measurement and high-precision measuring instruments, vehicles and their components, as well as mechanical engineering and equipment production – react most sensitively to the decrease in the value of the dollar.
Purgailis explains that in these industries there is a pronounced negative correlation between production volumes and the euro-dollar exchange rate – as the value of the euro increases relative to the dollar, the dynamics of production tend to weaken.
This is natural, because it is precisely these sectors that make up a significant part of Germany’s exports to the USA, so currency fluctuations in them translate into real changes in orders and production the fastest.
The pharmaceutical segment also stands out in German industry, Purgailis informs.
It is particularly sensitive to a strengthening of the euro against the dollar, as pharmaceuticals account for a significant share of exports to the US.
As the dollar weakens, these manufacturers’ price competitiveness in the U.S. market declines, increasing the risk of slower order growth and production fluctuations throughout the supply chain.
In the Baltic States, in this context, the most sensitive stage is the wood industry and the furniture manufacturing industry, Purgailis explains.
These sectors are closely connected with the German and Scandinavian markets, through which part of the production also reaches US consumers.
The proportion of their exports is high, while the proportion of imported raw materials is relatively smaller, so a weaker dollar does not so much reduce costs as put pressure on sales prices and profit margins.
Consequently, changes in the exchange rate in these sectors are felt particularly quickly, concludes the economist.
According to Purgailis, Lithuania, Latvia and Estonia are united by another common trend – the increase in the value of the euro against the dollar usually coincides with the slowdown in the growth rate of the manufacturing industry.
To an economist, this is not surprising, since industries sensitive to dollar fluctuations make up a significant part of the region’s industrial structure.
Therefore, a more pronounced decrease in the value of the dollar is not just news from the currency markets – it is a direct risk to manufacturers’ orders and production volumes.
Purgailis informs that the structure of the Estonian industry generally corresponds to the average model of the Baltic states, while in Latvia and Lithuania there are more industries that are sensitive to changes in the dollar exchange rate.
In Lithuania, in addition to the engineering industry and the furniture production segment, the paper and printing, plastic and rubber products, as well as the textile industries are also exposed to additional risks.
Compared to the rest of the Baltic states, Lithuania has the widest spectrum of industries sensitive to the depreciation of the dollar.
This reflects the reality – a more developed and export-oriented industry also means greater sensitivity to foreign trade and currency market fluctuations.
“However, as is often the case in the economy, the same change becomes a challenge for some and an opportunity for others. The increase in the value of the euro exchange rate against the dollar acts as a cost-reducing factor for some producers,” says Purgailis.
The economist explains that many raw materials are quoted in dollars on world markets, so a stronger euro means cheaper imports.
This also applies to technological and production equipment, as well as their components – from machine tools to robotization solutions.
Companies that buy raw materials and equipment in dollars, but sell final products in the eurozone, get the most from it – in such cases, their profit margins can even increase.
Summarizing the above, Purgailis concludes that there are a number of signs that indicate that the weakening wave of the US dollar could continue in the future.
The rhetoric of the US administration indicates that a weaker currency is currently acceptable to Washington, so the market is rightly considering the scenario of a further decline.
According to Purgailis, this means additional pressure on some German and Baltic producers, especially on those whose competitiveness in the US market directly depends on price.