How the New U.S. Tariffs Could Affect International Trade and Currency Exchange

On April 2, 2025, the U.S. government announced sweeping new tariffs aimed at increasing competitiveness and protecting national interests. Under this policy shift, a flat 10% import tariff¹ now applies to most goods entering the United States. Additionally, a "reciprocal tariff"¹ structure has been introduced for countries that maintain higher trade barriers against U.S. exports. While these measures are designed to rebalance trade relationships, they also create new complexities for international trade—and currency exchange rates are an important part of the equation.

In this blog, we’ll break down how tariffs and FX rates intersect, what the regional impacts look like, and how individuals and businesses can adapt to the changing landscape.

What are Reciprocal Tariffs?

The new tariff policy introduces a baseline 10% import tariff on most goods coming into the United States. However, for countries that charge high tariffs or create trade barriers for U.S. exports, a second layer of "reciprocal" tariffs has been established.

These tariffs are scaled based on what the U.S. government describes as the combined impact of foreign tariffs, currency manipulation, and non-tariff trade barriers. In practice, this means some countries face significantly higher U.S. import tariffs—up to 49% in some cases.

Examples of U.S. Reciprocal Tariffs by Country²

The stated goal is to promote fairer trade. In reality, these changes could make goods more expensive and introduce volatility into supply chains and financial flows.

Currency Movements and Tariffs: A Two-Way Street

When new tariffs are introduced, they don’t operate in isolation. Exchange rates often respond—though not always predictably—to trade policy changes and these movements can have a direct effect on the real-world cost of goods and services.

Here’s how:

• Tariffs can influence demand for currency.

  For example, if U.S. companies import fewer goods from Vietnam due to a 46% tariff, demand for the Vietnamese dong may fall, causing it to depreciate.

• Currency depreciation can make exports cheaper.

  A weaker dong could benefit Vietnamese exporters—but U.S. tariffs may cancel out that advantage.

• A stronger U.S. dollar can offset import costs.

  If the dollar strengthens in response to lower U.S. imports, it may help reduce the cost burden of tariffs on U.S. importers—but it could also hurt exporters.

As the global market responds to these changes, currency volatility is likely to rise. This increases both the risk and the opportunity for those making international payments.

Regional Impacts: Who’s Affected and How?

Let’s take a look at how the new tariffs could affect trade and currency dynamics across key global regions.

China (USD/CNY)

China faces a 34% reciprocal tariff², among the highest in the list. This could slow trade flows between the two countries, but from a currency perspective, the impact may be limited. The Chinese yuan is closely managed by the People’s Bank of China, and much of the trade between the U.S. and China is already conducted in U.S. dollars.

European Union (USD/EUR)

With a 20% reciprocal tariff² in place, European exports like automobiles, machinery, and wine could become more expensive in the U.S. A weakening euro, often tied to slower growth and trade friction, might provide some cushion—but it could also hurt European businesses relying on U.S. sales.

Japan (USD/JPY)

Japanese goods now face a 24% tariff². This affects sectors like automotive and electronics. The yen is often seen as a safe-haven currency, and that trend has already played out in recent market activity. The Japanese yen has strengthened against the dollar in the wake of the tariff announcement, along with the Swiss franc (CHF), which has also rallied. Interestingly, the U.S. dollar has not benefited from its usual safe-haven status and has broadly weakened, as U.S. bond yields have fallen and Treasuries have attracted risk-off flows instead, according to Steven Walker, Sr. Business Development Manager at Xe.

India (USD/INR)

India's exports to the U.S. are now subject to a 26% tariff². Given India’s prominence in sectors like pharmaceuticals and textiles, this could shift supply chains elsewhere. Meanwhile, the rupee could come under pressure if export volumes decline.

Southeast Asia (USD/VND, USD/THB, USD/IDR)

Vietnam, Thailand, and Indonesia all face higher tariffs (36%–46%)². This could reduce the competitiveness of these countries in U.S. markets and lead to currency devaluations. Importers should monitor these currencies closely to plan purchases effectively.

United Kingdom (USD/GBP)

The UK remains on a 10% flat tariff²—lower than many others. This may preserve U.S.-UK trade relations for now. However, currency volatility stemming from broader global uncertainty could still impact GBP/USD transactions.

What This Means for Businesses and Individuals

Whether you’re a business sourcing materials from abroad, or an individual making personal transfers or large purchases in another currency, the ripple effects of these tariffs can have real financial consequences.

It's also worth noting that the methodology used to justify the larger reciprocal tariffs has received criticism from economists. According to Steven Walker, Sr. Business Development Manager at Xe, the data referenced focuses solely on goods trade and does not include services—an area where the U.S. is a strong net exporter. This may limit the effectiveness of the policy in addressing the full scope of the U.S. trade balance.

Businesses

• Review contracts and pricing models: Higher tariffs and shifting exchange rates may require price adjustments.

• Diversify suppliers and markets: Consider alternatives in countries with lower tariffs or stable currencies.

• Use FX tools: Forward contracts and market orders can help lock in rates or minimize losses from sudden shifts.

Individuals

• Buying property abroad?

  Exchange rates and import taxes on building materials may affect costs.

• Sending money to family?

  FX fluctuations could change how much they receive.

• Paying tuition internationally?

  Budgeting accurately becomes more important with shifting rates.

Practical Tools to Stay in Control

At Xe, we offer a suite of tools designed to help you navigate international payments more effectively—especially in a volatile environment:

• Live exchange rate tracking to help you stay informed.

• Forward contracts so you can lock in rates today for transfers in the future.

• Rate alerts so you know when your target rate is available.

• Competitive transfer fees to help reduce your total cost, no matter the geopolitical climate.

FAQ: Tariffs and Currency Transfers

1. Do tariffs affect the exchange rate directly?

Not directly, but they can influence trade flows and investor sentiment, which in turn affect currency values.

2. If my supplier is in a high-tariff country, should I expect to pay more?

Yes. If the U.S. imposes a higher reciprocal tariff on that country, those costs may be passed on to you—unless your supplier absorbs them.

3. Can I avoid tariff-related costs by choosing another country?

In some cases, yes. Countries not subject to elevated tariffs (like the UK, Australia, or Singapore) may present cost-saving opportunities.

4. How quickly do currencies react to trade announcements?

Often within minutes or hours. Markets respond quickly to policy shifts, which is why tools like Xe’s rate alerts and market orders are valuable.

5. Will tariffs cause the U.S. dollar to strengthen or weaken?

It depends. Reduced imports could strengthen the dollar, but concerns over trade wars and economic slowdown might weaken it. Market perception plays a big role.

6. I’m planning a large overseas purchase. Should I transfer now or wait?

If you’re concerned about FX volatility, a forward contract lets you lock in today’s rate for a future transfer—offering peace of mind.

Final Thoughts

Tariffs and currency fluctuations are closely intertwined, and both can significantly affect the cost of international trade and personal transfers. As new policies reshape the global economy, those who stay informed and use the right tools will be best positioned to adapt.

At Xe, we’re here to help you navigate this evolving landscape with trusted rates, transparent fees, and expert support. Whether you're a business managing supply chains or a family managing overseas expenses, we’ve got you covered.

Explore our transfer tools or track live rates to stay one step ahead.

Citations

¹ The White House (2025)

² CNBC (2025)

**The information from these sources was taken on April 3, 2025.

***Some of the trade and currency insights in this article were contributed by Steven Walker, Sr. Business Development Manager at Xe.

The content within this blog post is not intended for use as financial advice. This content is for informational purposes only.