FX Outlook: Explaining tariff turbulence, de-dollarisation, and what it means for impact-focused organisations

April 2025 has already delivered its fair share of market-moving headlines, and for mission-driven organisations managing international flows the implications are significant. Below we seek to demystify what is going on...

After weeks of market anxiety sparked by the announcement of sweeping US tariffs, investors breathed a sigh of relief as news broke that the Trump administration would pause the measures for 90 days. The result? A much-needed rally across global stock markets, reversing some of the c.20% decline in US stock markets seen over the last 8 weeks. 

As the China-US trade war continues to spiral, however, tensions remain high and a sense of uncertainty prevails. What does this mean for those operating out of USD?

Firstly, why do tariffs even cause currency volatility?

Empirical evidence shows that a country that implements tariffs can usually expect the value of its currency to increase: An IMF study of 151 countries between 1963 and 2014 showed that tariff increases resulted in real exchange rate appreciation. 

But why is that? Well briefly put, it is down to supply and demand. If a US consumer buys goods from abroad they need to sell USD to buy the goods in the local currency. That creates supply. More supply than demand creates weakness in a currency. A tariff, however, discourages the US consumer (in theory) from buying abroad. Therefore there will be less USD in supply and the USD appreciates. Not that complicated.

So why is this messy? Because the picture is not always that clear. Firstly, when foreign countries retaliate (as Europe and China are doing) they create an offsetting force which is not always easy to quantify. Secondly, if investment market volatility continues too long, or investors think tariffs will damage an economy they do not invest. Back to supply and demand, there is then less demand for US investments so the currency weakens. As the Trump administration pulls back from certain tariffs, further uncertainty is added.

This is why we have been on such a rollercoaster, but behind the short-term volatility also lies a deeper shift: the accelerating trend of de-dollarisation. It is also worth examining what that could mean for purpose led organisations operating internationally...

The end of USD’s safe haven status?

For decades, the US dollar has enjoyed unrivalled dominance in global finance, underpinned by its deep liquidity, perceived stability, and widespread use in global banking infrastructure like SWIFT and dollar-clearing systems.

But cracks are appearing. There has been growing uncertainty around the USD, particularly in the face of persistent inflation and shifting Fed policy. These latest tariff shocks have added fuel to that fire.

Indeed recently we have seen a flight to traditional safe havens; but it wasn’t just USD leading the way. The euro, despite facing its own economic challenges and hefty tariffs, strengthened. The Swiss franc and Japanese yen also rallied. This tells us something crucial: the world is perhaps seeking alternatives to the dollar.

As we head into uncertain waters, therefore, it might not be a sure fire bet to assume that the dollar will strengthen. For organisations navigating global supply chains (especially those sourcing, donating, or operating across borders) this matters. A shift in currency preferences can have a direct impact on pricing, margin protection, and overall financial resilience.

Why de-dollarisation matters for impact-driven organisations

As businesses and NGOs alike diversify away from USD transactions, the ability to settle in local currencies becomes more than a nice-to-have. It’s a competitive edge, and in some cases, a necessity.

We’re seeing more suppliers introduce USD buffers to account for volatility, and some are starting to prefer local currency pricing altogether. For organisations with limited reserves or constrained budgets, this can put real pressure on operating margins.

GoodFX works to help clients navigate these shifts. From local pay-out capabilities to proactive rate locking, our approach is about making FX work for impact, rather than against it.

Tariff fallout: Recession risk and market volatility

While the 90-day pause has calmed markets for now, the underlying economic outlook remains shaky. Tariffs at this scale - averaging over 20% - represent an unprecedented economic experiment. Even if intended as a negotiating tactic, their impact is real: trade flows are contracting, investment is slowing, and recession fears are climbing.

Polymarket currently places the chance of a US recession above 60% and central banks are responding in kind. Forecasts suggest four Fed rate cuts, three from the ECB, and a similar dovish turn from the Bank of England. This could support weaker currencies in the medium term, but also heightens uncertainty.

What this means for charities and purpose-led organisations

Volatility isn’t going away. And for organisations with global reach - whether sending funds overseas, receiving grants, or sourcing materials - currency exposure can’t be ignored.

Key strategies to consider now:

• Build flexibility into your FX plans: The future is increasingly fragmented, and rigid approaches may fall short.

• Consider local currency pricing: It can help with supplier negotiations and reduce friction with international partners.

• Lock in rates where possible: Protect your budgets and prevent surprises, particularly on large or long-term transactions.

• Lean on your FX partners: GoodFX exists to help impact-driven organisations navigate these challenges with confidence and clarity.

  
  

As always, our focus remains on helping our clients turn FX from a source of risk into a strategic asset.

Whether you’re concerned about a weakening USD, uncertain tariffs, or evolving payment preferences, we’re here to support you with insights, tools, and purpose-aligned expertise.

If you're reviewing your FX strategy or need support navigating currency risk in an uncertain world, our team is here to help. Reach out to one of our specialists today to see how GoodFX can support your mission.