The U.S. dollar has slipped to its lowest value in the past four years, and students may face price increases as local businesses — especially those with high imports — experience higher costs.
When a currency depreciates, its value compared to other nations’ currency drops. Say you purchased a candy bar in Europe for €1, which was equal to $1. Now, that same candy bar is still €1, but it costs you $2. In comparison, the candy bar is more expensive for those using a dollar.
LynAnne Wilton has seen prices increase at the store she manages, HumanKind Fair Trade. The downtown store sells products imported from around the world.
“We’ve seen price increases and it’s hard to know all the reasons for it, if it’s just cost of materials, cost of labor or cost of shipping,” Wilton said. “I can’t speak specifically on if it was due to the USD, but there have been higher costs.”
What are the consequences of a USD drop?
The USD has lost purchasing power, the amount of goods a person can buy with one dollar has decreased, meaning that consumers are likely to face an increase in their grocery bill.
“I’ve definitely seen grocery prices increase,” said Vivian Li, an animal science freshman. “Especially considering that minimum wage has only increased a small amount compared to the current prices, I think it’s creating an issue.”
Similarly, import prices may increase because other nations’ goods and services increase in price when using the USD.
“We saw the biggest price increase in products from India, especially when they had a high tariff,” Wilton said.
In comparison to January 2025 — when the USD was last at its greatest value — the USD dropped about 6% with the greatest dip at the end of January 2026, according to the Intercontinental Exchange U.S. Dollar Index. The index measures the dollar compared to a basket of other currencies such as the euro and the yen.
“My rent increased unexpectedly for the next year, and the swimsuit I had bought from Triangl — an Australian brand — was more expensive than I anticipated. I assume it had to do with the tariffs,” said Margriet Poppens, an interdisciplinary studies junior.
Various factors can cause rent increases, but the deprecation of the USD may have heightened these effects.
READ MORE: San Luis Obispo County ranked 4th least affordable in the US
Why did the USD drop?
“There are a lot of reasons the USD can change value,” said Matthew Cole, a Cal Poly economics professor specializing in international trade. “Theory suggests that tariffs would cause the currency to appreciate, but what we are seeing is the opposite. So, my sense is that expected inflation and general uncertainty is probably the main driver of the depreciation.”
President Trump’s past onslaught of tariffs may have led other countries to lose trust in the USD, causing its demand to decline. In turn, the value of the dollar drops as well.
READ MORE: Downtown San Luis Obispo businesses manage the cost of tariffs
“The USD has historically had a strong value primarily because it’s a stable economy that other countries want to invest in,” Cole said.
Cole explained that the global economy changes frequently, so it is likely that the USD will strengthen again — the main question is when.
If inflation rises, the Federal Reserve may need to increase interest rates, consequently increasing the dollar because foreign investors see the USD as more valuable. Thus, demand increases. However, there are a multitude of additional factors, such as production rates, investor attitudes and broader global impacts.
“At this point, I don’t think this is a time to panic,” Cole said. “I think consumers and businesses that import can expect prices to go up. Given the unprecedented amount of tariffs, people are already seeing that, so the dip in USD is just going to increase the effect that tariffs were already having.”
How might the USD drop benefit San Luis Obispo?
However, the drop in the USD can have benefits. U.S. exports are now cheaper in comparison to other nations’ goods, so exporting firms may see a boost in sales. Additionally, foreign tourism may increase as it becomes less expensive to travel within the United States.
As a popular tourist destination, San Luis Obispo may see an uptick in visitors.
“Given the time of the year, we do normally see a lil bump, but nothing out of the ordinary,” said BooBoo Records Inc. Manager Miguel Avila.
Summer remains one of SLO’s busiest travel seasons as people come to enjoy the warm weather, beaches and hiking. Only time will tell if there is an unusual increase in tourism.
“Foreign tourism could go up because we’re now a ‘cheaper’ destination,” Cole said. “However, my sense is that that has been down recently for other, more political reasons.”
The International Center commented that they do not have sufficient data to answer if the depreciation of the USD will affect international services or study abroad.
