Changes in US foreign policy and aggressive tariff stances have caused currency volatility and new risks for North American businesses operating internationally. Tom Hoyle, Head of Corporate Solutions, MillTech, draws on new research of North American and UK corporates to analyse the impact on their FX strategies.
Currency shocks and trade disruptions have rocked the global business environment over the past year. The FX landscape is becoming ever more unpredictable, and reignited levels of volatility in major world currencies are set to disrupt businesses, particularly those with international operations and supply lines. This year, the US dollar hit a three-year low just six months into Trump’s presidency, a move that few had predicted, given that it had sat on a two-year high when he took office.
Managing currency risk has been moved down the priority list for far too long. However, tariffs and the ensuing currency volatility are bringing risk management to the forefront of businesses’ strategies, given the huge losses they could incur on unhedged risk. Being passive is no longer an option for corporates, they must take action into their own hands to minimise losses to bottom lines and develop more proactive hedging strategies.
Stoking the flames
Tariffs have become one of the biggest economic flashpoints of 2025, dominating headlines and driving volatility across global markets. ‘Liberation Day’, for example, saw the Trump administration escalate its tariff-driven foreign policy, which sent the S&P plunging nearly 10% over only two days. Tariffs have also caused huge FX market instability, with the dollar witnessing its worst half-year compared with major currencies since the 1970s, significantly upping the risk for businesses with international supply chains.
Among North American corporates, tariff-driven currency volatility has taken a toll on nearly seven in 10 (69%), eroding profitability and undermining competitiveness in international markets. Similarly, more than half (56%) of UK corporates surveyed said that tariff-driven dollar weakness has negatively impacted their businesses’ finances in 2025, and 62% of UK and US corporates polled have experienced losses from market volatility so far this year.
Unhedged FX risk has compounded the problem, with more than four in five US firms (83%) surveyed reporting losses. In stark contrast, just one in five (20%) said currency movements had benefitted their business.
The FX volatility brought on by tariffs, particularly within currencies such as the dollar and euro, has exposed just how vulnerable even the most stable-seeming firms can be to FX risk. For US businesses exporting internationally, a weaker dollar can boost competitiveness, but for importers, it’s raising costs at a time when shifting global trade dynamics are already clouding their outlook. Similarly, businesses exporting to the US, from the UK or Europe, for example, are now at a disadvantage, whereas those importing now hold more buying power. Fortunately, corporates are taking action.
Taking the initiative
With currency volatility surging to levels not seen since the Silicon Valley Bank and Credit Suisse collapse in early 2023, corporates are implementing new hedging strategies to protect their bottom lines.
More than nine in 10 (91%) of the North American firms surveyed now hedge their FX risk; a sharp increase from 82% in 2024 and 81% in 2023. Additionally, of the firms that don’t currently hedge their FX risk, more said they were considering doing so in 2025 (65%); another significant increase from last year’s 51%.
Not only are firms hedging more, but they’re shifting their hedging strategies altogether. Extending hedge lengths was also the top priority for UK businesses (56%) surveyed in the wake of US tariffs, with lengths increasing to as high as 6.74 months this year. Similarly, the most popular change to North American hedging strategies in 2025 was increasing hedge lengths (64%).
Extending hedge lengths is a defensive strategy that enables firms to lock in rates for longer, providing greater certainty and stability amid ongoing volatility. As more market participants look to buy near-term protection, market spreads on short-end instruments are increasing. Hedging further along the curve maintains the same level of protection against currency movements, but without the need to crystallise profit and loss generated by short-term FX swings.
Hedge ratios in the UK and US have also been on the rise, now sitting at an average of 57%, up from 47% a year before. Elevated hedge ratios in 2025 are a sign that corporates are moving to protect greater amounts of FX risk as the market experiences new levels of volatility as a result of tariffs and broader geopolitical instability. The more risk they leave exposed, the greater the chance of incurring losses on unhedged capital.
Automation and outsourcing
In North America, automation was surveyed firms’ second-highest priority (32%), reflecting a push to streamline operations, reduce manual errors, and increase responsiveness. As the FX market becomes increasingly complex and uncertain, the ability to act quickly and accurately through automation can give businesses a competitive edge.
All North American businesses surveyed outsourced some part of their FX operations. Outsourcing offers significant benefits, such as improved transparency in execution quality through transaction cost analysis and comprehensive management of FX operational tasks. By entrusting these complex functions to specialised providers, businesses can streamline their operations and concentrate on their core competencies, driving growth and innovation.
This renewed focus reflects a broader recognition that outsourcing and automation can offer access to better pricing and top-tier counterparties, benefits that are often out of reach for smaller or mid-size corporates.
Refining strategies
Currency volatility is yet to reach the high levels witnessed in the early 2020s. However, sharper price swings as a result of trade wars, diverging central bank policies, and macroeconomic uncertainty are adding fresh uncertainty into the market.
For CFOs and treasurers, now is the moment to take a fresh look at how their FX risk is managed. That means rethinking hedging ratios and lengths, choosing the right balance of instruments, and using new technology more intelligently. Tools such as automation and outsourcing are becoming critical components of this process, helping teams move faster, reduce errors, and make better decisions from exposure tracking to execution.
In a market where currency moves can make or break a quarter’s profits, managing FX risk proactively isn’t a nice-to-have; it’s a necessity. The businesses that come out ahead will be the ones that see volatility not as a danger, but as an opportunity to put their revised strategies, flexibility, and leadership to work.