Global tariffs have rocked international markets over recent months. This instability has spread to currency markets too, with the dollar falling against many major currencies, threatening businesses that operate internationally. Here, Eric Huttman, CEO, MillTech, explores the impact of tariff-driven volatility on corporates and how they can protect themselves from FX risk.
The last wave of global tariffs imposed by the US and the swift retaliatory moves from major trading partners upended global markets. These weren’t just political headlines. For corporates, tariffs can be financially bruising, triggering sharp swings in FX rates, disrupting supply chains, and hiking the cost of carrying out cross-border business. Despite the increased momentum of deal-making in recent weeks, we’re not out of the woods yet, and tariff-led volatility often has long-lasting consequences.
When the world’s largest economy pulls the tariff lever, it tends to shake the confidence of others. Threatening economic policies often work to decrease the value of other currencies. This could be good news if you’re a local American business standing to benefit from cheaper exports. However, retaliatory tariffs have also threatened trade for US businesses. The result? Sudden and sustained currency volatility, sending the value of the dollar down against many key currencies. For many corporates around the world, tariffs are likely to mean rising costs, currency mismatches, and tough decisions for CFOs and treasurers.
Volatility can cut both ways
Right now, FX risk is top of mind for corporate finance leaders. New research shows that 100% of corporates say their businesses have been affected by tariff-driven volatility, with 52% of US corporates hit negatively.
It’s no surprise, then, that volatility also emerged as the most significant external factor influencing FX hedging decisions in Q1 2025. CFOs are in protection mode, making sharp pivots to their FX strategies as they try to manage the bottom-line impact of unpredictable market conditions.
Interestingly, though, the pain hasn’t been evenly felt. In the UK, 85% of corporates actually reported a positive impact from tariff-induced volatility. Why? It likely comes down to the dollar falling against the pound. This has made it cheaper for British companies to import from both the US and China, two of the country’s largest trading partners, showing how volatility can cut both ways.
Adapt and survive
Fortunately, corporates aren’t just sitting on their hands. Instead, many are opting to adapt their hedging strategies in an effort to keep pace with this fast-moving FX market.
More than half (54%) have extended their hedge lengths, locking in FX rates for longer periods to ride out the uncertainty, while 43% increased their hedge ratios. These are moves that reflect a growing recognition of just how persistent tariff-driven volatility can be.
Extending hedge lengths enables corporates to lock in a favourable rate and protect against future swings without needing to book the daily profit or loss caused by short-term fluctuations.
Increasing hedge ratios protect a larger proportion of FX risk, showing that corporates are taking measures to prepare for longer-term uncertainty.
On the flip side, those without hedging programmes are more overtly exposing themselves to currency swings, with 76% of US and UK corporates suffering a net loss on their unhedged risk in 2024. For them, the lesson is clear: if you don’t manage your FX risk proactively, you could face unexpected hits to your profit margin.
Hedging isn’t just about throwing up a wall and hoping for the best. Timing is crucial. Locking in a hedge at the wrong moment could cement losses rather than avoid them. Any FX risk management strategy needs to be flexible enough to respond as the world changes around it.
Corporates must be ready, not reactive
The bottom line is that the financial impact of tariffs is acutely felt by businesses trying to navigate international markets. For CFOs and treasurers, the smart play is to build resilience into their FX strategies, because in a world of rising volatility, hoping for stability isn’t good enough. Corporates that fail to hedge currency risk could be putting their bottom lines at the mercy of fluctuations in the FX market, and once they’ve incurred losses, it’s often already too late.
Tariff-driven volatility is a reminder that the FX landscape can shift overnight, and often does. For corporates, the goal isn’t to predict the future, but to be ready for it. That means having robust FX hedging frameworks in place, constantly reviewing ratios and lengths, and working with trusted advisers and platforms that can offer real-time insights into the market.
This article examines the data and results of the Q1 Hedging Monitor 2025 survey carried out by Censuswide on MillTech’s behalf. The MillTech Quarterly Hedging Monitor research shares the findings from a quarterly survey of 250 senior finance decision-makers at UK and US corporates, described as those with a market cap of $50m to $1bn. The data in this report is from a survey conducted between 15 and 24 April 2025.
This article examines the data and results of the Q1 Hedging Monitor 2025 survey carried out by Censuswide on MillTech’s behalf. The MillTech Quarterly Hedging Monitor research shares the findings from a quarterly survey of 250 senior finance decision-makers at UK and US corporates, described as those with a market cap of $50m to $1bn. The data in this report is from a survey conducted between 15 and 24 April 2025.
Ends
* This article also examines the data and results of the Q4 Hedging Monitor 2024 survey carried out by Censuswide on MillTech’s behalf. The MillTech Quarterly Hedging Monitor research shares the findings from a quarterly survey of 250 senior finance decision-makers at UK and US corporates (described as those who have a market cap of $50mil up to $1 billion) to provide a snapshot of corporate hedging activity and insight into influential factors and other key trends. The data in this report is from a survey conducted between 14th and 27th of January 2025.
The full list of job titles surveyed and included within this report is as follows: Accountants, Chief Financial Officers (CFO) Financial Analysts, Financial Accountants, Financial Consultants, Financial Manager, Analysis Managers and Treasurers.