In April 2025, President Trump introduced the revised 'Liberation Day' tariff plan, imposing a uniform 10% tariff on imports from most countries while levying a substantial 125% tariff on Chinese imports. This policy marks the most aggressive U.S. trade maneuver in decades and is already shaking global supply chains, market confidence, and currency dynamics.

Impact on the U.S. Dollar

The dollar is under pressure on multiple fronts. These tariffs act like a tax on U.S. growth, raising costs for businesses and consumers alike, while global partners prepare retaliatory trade measures. The result? Deteriorating investor sentiment and increased expectations that the Federal Reserve will respond with monetary easing.

April’s CPI print, which came in below expectations, suggests that inflation is no longer the dominant concern. With core CPI softening to just 2.4% and headline inflation decelerating rapidly, traders are now pricing in one or more Fed rate cuts before the second half of the year. Lower rates tend to weaken the USD, and this cycle looks no different.

The USD Index has already shown signs of rolling over, and major currency pairs - especially EUR/USD and USD/JPY - are swinging more violently in response to policy signals. A weakening USD regime is now the base case for many macro strategists, especially as the U.S. runs twin deficits (fiscal and trade) and loses appeal as the highest-yielding G10 currency.

Consequences for Importers, Exporters, and Manufacturers

• Importers: They’re facing a double blow: tariffs raise the cost of goods, and a weaker dollar increases the cost of foreign currency payments. Margins will be compressed unless companies adjust pricing, renegotiate supplier contracts, or hedge FX risk.

• Exporters: U.S. exporters benefit from a softening USD, as their goods become more competitive globally. But that upside may be limited if retaliatory tariffs shrink overseas demand, especially from China and Europe. Exporters who invoice in foreign currencies also face translation risks, and volatility could erode their pricing power.

• Manufacturers: Companies that rely on global supply chains for inputs - and ship finished goods abroad - sit at the epicenter of this disruption. Shifting supplier bases, re-evaluating contract currencies, and managing timing mismatches between costs and revenues are now urgent priorities.

Anticipated Currency Volatility

The whipsaw in FX markets isn't over. The divergence between soft inflation, tightening trade policy, and uncertain monetary policy is creating fertile ground for two-way volatility. FX markets are now reacting more to political headlines than economic data, and this is likely to continue. The Chinese yuan has already begun to weaken, and analysts expect further devaluation as Beijing responds to 125% tariffs.

Expect USD/EM (emerging market) pairs to remain volatile. Cross-border transactions, especially in Asia and Latin America, are becoming more expensive to hedge. Meanwhile, traditional safe havens like the Japanese yen and Swiss franc are seeing renewed flows, which adds complexity for companies with global exposures.

Strategic Considerations: Why Risk Management is Now a Strategic Priority

With currency swings threatening profit margins and operational visibility, businesses must elevate FX management from a back-office function to a strategic C-suite concern.

This is where Pillar comes in. As a leading hedging service provider, Pillar helps companies navigate turbulent currency environments with confidence. Our platform provides:

• Real-time exposure monitoring across currencies and commodities

• Automated alerts for FX triggers and policy-related market shifts

• Bespoke hedging strategies tailored to your commercial contracts and trade cycles

• Seamless execution and reporting to help CFOs manage risk transparently

Whether you're importing electronics from Vietnam, exporting grain to Europe, or managing a multi-currency supplier network across Asia, Pillar enables you to hedge smarter—not harder.

Bottom Line: The 'Liberation Day' tariffs are the opening shot in a new era of trade uncertainty. Combined with a likely shift in Fed policy and a structurally weaker dollar, this environment is tailor-made for increased volatility. Companies that integrate FX hedging into their core planning processes will outperform. Those that don't will be left exposed.

It’s not just about managing risk - it’s about seizing opportunity. With Pillar, you can do both.