In January 2025, Donald Trump officially took the driving seat of the world’s largest economy and became president of the United States of America for a second term.
In an announcement in late November 2024, Trump outlined plans to introduce steep tariffs on Canada, Mexico and China. He also threatened the EU in December with potential tariffs.
In February 2025, his proposals kicked into action, with tariffs imposed on China and Canada.
The president’s strong stance on tariffs has left the world wondering – is this the end of free trade as we know it?
For businesses involved in cross-border trade, understanding the ripple effects of such policies is crucial – not only for strategic planning but also for managing financial risks like currency volatility.
In this article, we’ll explore the impact of tariffs on trade, how financial markets reacted to Trump’s proposed and first round of tariffs, and why businesses need robust risk management strategies to protect their bottom line in uncertain times.
Table of contents
- What are tariffs and how do they affect trade?
- What did Trump’s proposed tariffs look like?
- How could Trump’s tariffs impact your business?
- How to manage tariff challenges
- Conclusion: turning challenges into opportunities
- 10 FAQs about how Trump’s proposed tariffs could impact businesses
What are tariffs and how do they affect trade?
Tariffs are taxes placed by governments on imported goods. Their aim is to protect domestic industries by making foreign goods more expensive. However, they can also lead to higher costs for businesses and consumers.
Read: What are tariffs in global trade?
What did Trump’s proposed tariffs look like?
In his November announcement, Trump suggested tariffs on Canada, Mexico and China.
Trump claims these countries are primary contributors to the inflow of illegal drugs and people into the US. With no clear deadline in sight, Trump said these tariffs will remain in place until he sees a convincing decline in these two issues.
Here’s a breakdown of each tariff:
- 25% tariffs on imports from Canada and Mexico, mainly targeting automotive and energy sectors.
- 10% tariffs on Chinese goods, affecting electronics and consumer products.
The proposed policies sent shockwaves through global markets. The US dollar strengthened against the Mexican peso by 1.84% and Canadian dollar by 1.26%. Stocks in Europe, particularly automakers, faced steep declines.
Such reactions highlight how volatile financial markets can be to political announcements, especially those surrounding global trade. With the world’s eyes on Trump and other leaders, it’s crucial businesses prepare themselves for volatility.
What are Trump’s 2025 tariffs?
True to his word, Trump imposed tariffs on China, Mexico and Canada in February.
Here’s a breakdown of each tariff:
- 10% on all imports from China (Beijing responded immediately with its own tariffs).
- 25% tax on imports of steel and aluminium – particularly damaging for Canada.
The president has also threatened an additional 25% tariff on Canada and Mexico, but these are on pause following discussions between the nations.
How did markets respond?
Well, unlike the impact from the proposed tariffs, the Canadian dollar gained on the US dollar following the announcement of tariffs on steel and aluminium.
The Chinese renminbi lost some ground to against the US dollar following the 10% tariffs on its goods.
The different reactions from currencies of impacted nations could suggest that markets still don’t know what to make of Trump’s tariffs.
Uncertainty is the key theme – highlighting why it’s essential that businesses involved in global trade protect themselves against currency risk.
How could Trump’s tariffs impact your business?
Now that we’ve discussed what Trump’s supposed tariffs could look like – and their initial impact on markets – let’s look at how they could impact your business.
Currency values
Tariffs can cause currency values to move significantly as businesses and investors react to the changing trade environment. For instance:
Stronger dollar
US tariffs often increase demand for the US dollar as importers require it to pay for goods subject to higher tariffs. This can lift the dollar, making US exports more expensive and less competitive globally.
However, the dollar weakened in early–to-mid February, with investors preferring Treasuries instead. This suggests some concerns about potential economic fallout in the US, potentially limiting USD’s performance in the short-term.
Impact on trading partners
Currencies of countries targeted by tariffs, such as the Mexican peso or Chinese renminbi, may weaken, as we’ve seen so far. This can increase costs for businesses relying on imports from these regions.
However, we’ve also seen the inverse to be true – with the Canadian dollar strengthening against the US dollar following the tariff announcements.
If your business trades in dollars, the impact of Trump’s tariffs on currency values could significantly impact your purchasing power and bottom line.
The current uncertain environment highlights the importance of effective foreign exchange management. By effectively strategising against risk, your business can limit the potential negative impacts of changes in the dollar’s value.
At Privalgo, we specialise in helping businesses manage currency risk, budget effectively and protect their profits from potentially damaging swings.
We do this through products like forward contracts and an attentive personal service to respond quickly to your needs.
Get in touch with our Currency Specialists to learn more about how we can help your business navigate disruptive dollar movements ahead of Trump’s proposed 2025 tariffs.
Supply chain issues
Tariffs directly affect the cost of imported goods, which can ripple through the supply chain. Businesses may face challenges such as:
Increased costs
Higher import duties make it more expensive to bring raw materials and components into the US from countries targeted by tariffs, leading to rising production costs for manufacturers.
Disrupted operations
Suppliers may need to adjust sourcing strategies, shifting from countries targeted by tariffs to alternative markets. This can cause delays and require considerable operational adjustments.
Limited supplier options
In some industries, finding alternative suppliers is not always feasible. This can lead to product shortages, increased lead times, and higher prices for end consumers.
Consumer prices and demand
As mentioned above, tariffs can have a knock-on effect that eventually increase prices for end consumers. Here are some of the ways they can weigh on consumers’ pockets:
Inflated costs
Businesses may pass on the higher costs of tariffs to customers through price hikes. This can reduce demand for products, particularly in price-sensitive markets.
Shifting consumer preferences
As prices rise, consumers may switch to locally made alternatives or lower-cost substitutes, impacting sales for businesses reliant on imported goods.
Market competitiveness
Tariffs can skew competition, benefiting domestic producers at the expense of those relying on global supply chains.
How to manage tariff challenges
To limit the effects of tariffs, your business can take proactive steps such as:
Monitor currency movements
Stay updated on how tariffs affect exchange rates relevant to your business. You can use a currency specialist like Privalgo to keep you up to date and utilise products like market orders to help you achieve desired exchange rates if currency markets move suddenly.
Reassess supply chains
Explore other ways of sourcing products/raw materials to reduce dependency on countries subject to tariffs and rising costs.
Introduce FX risk management strategies
Partner with a currency specialist to implement risk management strategies.
While tariffs aim to protect domestic industries, their ripple effects often lead to higher costs, reduced trade flows, and currency volatility. For businesses, the ability to stay agile and adapt to these challenges could be hugely important on the road to future success.
Read: How to export from the UK to the USA
Conclusion: turning challenges into opportunities
Trump’s proposed tariff policies present new challenges for businesses engaged in global trade in 2025 and beyond.
Businesses that understand the potential impact of trade wars and proactively manage risks can turn potential setbacks into opportunities.
At Privalgo, we’ve helped businesses protect their profits through uncertain times with currency risk management solutions tailored to their unique needs.
Whether you’re managing currency risk or streamlining international payments, we’re here to support you.
Contact us today to learn how we can help your business thrive in the face of global trade challenges.
10 FAQs about how Trump’s proposed tariffs could impact businesses
Below are 10 frequently asked questions our readers ask about what Trump’s proposed trade tariffs are and how they might affect businesses and global trade.
What tariffs has Trump imposed in 2025?
In February 2025, Trump imposed:
- 10% tariffs on all imports from China (Beijing retaliated with counter-tariffs).
- 25% tariffs on steel and aluminum imports, primarily affecting Canada.
- Potential 25% tariffs on Canada and Mexico, currently paused pending negotiations.
How have markets reacted to Trump’s tariffs?
The Canadian dollar strengthened against the US dollar following the steel and aluminium tariffs, while the Chinese renminbi weakened due to concerns over economic slowdown. Stock markets initially dipped but have since shown mixed reactions as businesses adapt.
How do tariffs impact currency values?
Tariffs create currency volatility by shifting demand:
- The US dollar may strengthen as importers need it to pay for tariffed goods.
- Currencies of tariff-targeted countries may weaken, increasing costs for businesses reliant on imports.
- Some exceptions occur, as seen with the Canadian dollar strengthening instead of weakening.
What industries are most affected by Trump’s 2025 tariffs?
Industries reliant on trade with China, Canada, and Mexico, including:
- Manufacturing (higher steel and aluminum costs).
- Electronics and consumer goods (tariffs on Chinese imports).
- Automotive sector (potential tariffs on Canada and Mexico).
How could Trump’s tariffs impact UK businesses?
While the UK is not directly affected, knock-on effects include:
- Supply chain disruptions (higher costs for U.S. imports).
- Currency volatility, impacting GBP/USD exchange rates.
- Potential future trade tensions, especially if the UK negotiates a new U.S. trade deal.
What steps can businesses take to manage FX risk amid tariffs?
Businesses can:
- Use strategies like forward contracts to lock in exchange rates.
- Monitor currency markets closely to anticipate fluctuations.
- Work with FX specialists to navigate volatile trading conditions.
How will Trump’s tariffs affect global supply chains?
Tariffs increase costs and force businesses to rethink supply chains:
- Some companies will shift manufacturing away from China to avoid tariffs.
- Logistics delays may occur as businesses seek alternative suppliers.
- Increased costs for raw materials, affecting pricing strategies.
Will Trump impose additional tariffs in 2025?
Trump has hinted at expanding tariffs on the EU, targeting European automakers and agriculture exports. Businesses should prepare for further trade tensions.
Could tariffs be removed if negotiations succeed?
There is no set timeline for tariff removal. Trump stated they will stay in place until he sees a decline in illegal drug and immigration issues, meaning uncertainty remains high.
How can businesses stay competitive despite tariffs?
Diversify suppliers to avoid tariff-heavy markets.
Implement FX risk management to protect against currency fluctuations.
Monitor trade policy updates and be ready to adjust strategy accordingly.
