The U.S. dollar has been the world’s dominant currency for three-quarters of a century, and though it may not be apparent to inflation-wracked Americans, the currency maintains more purchasing power than most of its major rivals. That’s helpful to U.S. consumers, though it comes at a cost.

Inflation is diminishing the value of the euro, yen and pound relative to the goods and services they can buy even faster than it ravages the greenback. The dollar index, which measures the U.S. currencies against those three rivals plus the Canadian dollar, Swedish krona and Swiss franc, has surged almost 20% over the last 14 months, notably reaching parity with the euro this month for the first time since 2002.

A strong dollar has benefits for much of the country. American consumers will be better off — their currency’s strength makes it cheaper to purchase imported food and book hotels overseas, for instance. Federal Reserve Chair Jerome Powell may benefit the most, as the greenback’s strength vindicates his aggressive rate hikes to combat rising prices. But not everyone is cheering. American companies that sell most of their products overseas will see revenue pressures. Central banks, especially in Europe and Japan, may be forced to embrace hawkish policies to fight for their weakening currencies at the expense of economic growth.

“The Fed woke up to the [inflation] problem later than they should have. And because of that, they’ve had to be so aggressive,” says Chris Low, chief economist at FHN Financial, a broker-dealer and subsidiary of First Horizon Bank. “The dollar wouldn’t be so strong if other central banks woke up before they did. But, by and large, other central banks are behind, especially in Europe.”

A strong dollar may help solve some of the Fed’s problems, Low says. One way it could do that is by slowing the global economy as foreign companies scale back spending on goods that have become more expensive in their currencies. Many of the world’s most important commodities, like oil, are priced in dollars. As the greenback rises, that drags costs higher for purchasers using other currencies.

The Fed is expected to hike rates by another 75 basis points this month, according to a Reuters poll of 102 economists. But a slowing economy with reduced inflationary pressures could reduce the need for such drastic measures in the future.

The strong dollar also makes imports cheaper, easing some of the pain that Americans feel when making purchases. Abroad, the ascendant currency is a boon for U.S. tourists riding gondolas along Venice’s canals, drinking Bavarian lagers in Munich’s beer gardens, and strolling through the Louvre in Paris. Travelers have already begun to take advantage of lower prices. Hotels.com and Expedia reported double-digit growth in searches for summer trips to top European destinations in early July, compared with late June, with cities like Paris (+25%), Frankfurt (+25%) and Amsterdam (+20%) topping the list. The average nightly rate for a hotel has fallen as much as 10% from pre-pandemic levels in Germany, according to Hotels.com.

U.S. businesses that rely on consumers overseas, however, will be among the hardest hit by the strong dollar, as increased prices will force some would-be buyers to reconsider. The companies with the most risk are primarily exporters of heavy machinery like tractors, airplanes, and cranes, especially those that build most of their products stateside. They will face increased competition from foreign rivals that manufacture their products at lower costs outside the U.S. and can import at lower costs.

Large companies like John Deere and Caterpillar are at lower risk, forecasting 2% drops in revenue, according to the companies’ 10K disclosures. These companies relocated much of their production to markets overseas, partially a response to the pain they felt the last time the dollar was so strong. But, mid-sized manufacturers like Oshkosh, Terex, and other makers of construction and agricultural equipment stand to lose 10% of revenue thanks to the dollar’s rise.

Boeing is especially susceptible. Its primary competitor is Airbus, which builds many of its aircraft in Europe and Asia. “When the euro weakens, they have a cheaper cost base,” says Charles Armitage, an aerospace and defense analyst with Citigroup. Boeing may get bailed out of that tough situation by large orders from airlines needing to upgrade their fleets. Delta, for example, ordered 100 of the company’s 737s this month. Other U.S. companies will have to compete with foreign rivals that can sell their products for cheaper, thanks to their weaker currencies. “They can price you out,” Armitage says.

The biggest loser in the tale of dollar-euro parity is the European Central Bank, which recently raised interest rates to 0% from -0.5%, the bank’s first hike in over a decade. “Americans should not view this as some great victory of the American system,” says Peter Morici, an economist and professor emeritus at the University of Maryland. “This is a report card on Europe. And they just got a failing grade.”

The inflation generated by currencies declining against the dollar could leave central bankers around the world with no choice but to follow the Fed in aggressively raising rates, despite the economic consequences.

“Markets will adjust. The dollar will fall. And the euro and the pound at some point will recover,” Morici says.