Who should read this:
- UK-based businesses that import or export goods internationally
- Investors with exposure to international markets or currency holdings
- Individuals planning large foreign currency transfers or regular cross-border payments
Why it’s worth reading
- Global trade disputes are having a real impact on currency values and volatility
- Understanding what’s behind the headlines helps you make smarter financial decisions and make informed decisions on when to purchase or sell currency.
- We’ll explain how trade tensions can affect exchange rates and what you can do about it
What You’ll Learn
- How tariffs and trade wars are moving the Pound, Dollar, Euro and other major currencies.
- What recent data reveals about the UK’s economic position
- How to protect your international transactions with support from Indigo FX
Trade Tensions, Tariffs, and Tumbling Rates
Trade wars aren’t just a distant political chess game; they have a real effect on how your money moves. Recently, global trade tensions, particularly between the US, China, and the EU, have triggered wide swings in the foreign exchange market. Volatility is on the rise across the board, from GBP to EUR to emerging market currencies.
At the heart of the issue are trade tariffs — taxes on imports and exports. Tariffs are being wielded by US President Donald Trump as an economic weapon, and their impact reaches far beyond international trade relations.
Pound Sterling: Resilient, But Not Immune
The UK has managed to avoid direct tariff confrontation with the US, but it’s not out of the firing line. According to the LSE, the knock-on effects of Trump-era tariffs could shave up to 2.5% off UK GDP. This has naturally drawn attention from currency traders.
Sterling has shown some resilience, partly because of a strong services sector and relatively stable monetary policy. But when major trading partners like the US and EU are clashing, there’s no such thing as a neutral observer. The more fragmented global trade becomes, the more uncertainty there is around UK exports and investment flows, which in turn puts pressure on the pound.
US Dollar: Tough Politics, Weaker Currency?
Ironically, aggressive US trade policies have hurt the very currency some assumed would benefit. Tariffs may protect some domestic industries in the short term, but they can also weaken long-term growth by raising costs, driving up inflation, and reducing competitiveness.
This has created a tug of war for the dollar: short-term strength as a safe haven, but long-term risks as inflation creeps up and global confidence wobbles. Recent data even suggests US manufacturing is slowing down, which has seen the dollar dip to near three-year lows.
The Euro: Stuck in the Crossfire
The euro has had its fair share of challenges, from sluggish economic growth to internal political divides. Now, the EU finds itself increasingly entangled in the global tariff battle, particularly with the US imposing duties on European goods like steel, aluminium, and cars.
Despite hawkish tones from ECB members suggesting caution over cutting interest rates, traders remain wary. The currency is being squeezed between weak inflation and political headwinds, making it vulnerable to further drops if the trade landscape deteriorates.
What This Means for You
Trade wars directly affect what you pay (or receive) when dealing with international currencies. For UK-based businesses and individuals, the volatility can create challenges, but also opportunities, if you know how to navigate the market.
- Importers face rising costs from weaker sterling or tariff-inflated supplier prices
- Exporters may gain short-term pricing power but risk losing access to stable markets
- Investors are exposed to FX shifts impacting asset values and repatriated returns
- Holidaymakers and students abroad may find their budgets fluctuating weekly
Indigo FX: Your Partner for Currency Risk Management
Since 2012, Indigo FX has helped clients manage currency movements and reduce exposure in uncertain times. With over £3 billion in international transfers processed, we offer more than just competitive exchange rates:
✅ Tailored FX strategies, including Spot, Forward contracts and Market orders
✅ Real-time support and personalised guidance
✅ Access to over 60 currencies and 150+ countries
If you’re concerned about the impact of trade wars on your payments, we can help you plan with clarity and confidence.
Ready to make smarter international transfers? Get in touch with our team to explore your options.