Tariff-induced FX volatility prompts shift in hedging strategies among North American corporates - Trade Treasury Payments

• 69% of 250 corporates surveyed across the US and Canada report profitability pressure linked to tariff-induced currency volatility
• 83% have suffered FX-related losses, largely due to unhedged exposure
• 91% now hedge FX risk, up from 82% in 2024 and 81% in 2023, despite rising costs

Currency volatility driven by US tariffs is affecting the profitability and competitiveness of North American corporates, according to a new report by FX and treasury technology provider MillTech. The North American Corporate FX Report 2025, based on a survey of 250 senior finance executives, found that 69% of respondents had experienced negative business impacts due to tariff-linked currency movements, while 83% reported losses from unhedged exposures. As a result, FX hedging levels have risen to 91%, marking a notable increase from previous years.

The MillTech North American Corporate FX Report 2025 analyses the findings from a survey of 250 senior finance decision makers at corporates across the US and Canada, revealing how they are responding to tariff-driven volatility, accelerating geopolitical risk and heightened market volatility, and leveraging AI and automation.

Tariffs have become one of the biggest economic flashpoints of 2025, dominating headlines and driving volatility across global markets, causing issues for North American firms, especially those that don’t hedge their FX risk. As a result, there are high hedging levels, with 91% currently hedging their FX risk, up from 82% last year and 81% in 2023. This is despite 94% reporting higher hedging costs, up sharply from 73% last year, with an average increase of 76%.

Firms are adjusting their hedging strategies to manage tariff-driven volatility, with 64% planning to increase hedge lengths. Average hedge tenors remain at a three-year low of just 4.9 months, suggesting the shift is still early or selective.

Nearly nine in ten (87%) firms have made changes to their sourcing and manufacturing strategies in ways that impact their FX transactions as a result of tariffs. Despite tariff concerns and changes they have been forced to make, the vast majority of firms (84%) remain optimistic, suggesting they believe the near-term tariff pain will be worth the long-term gain.

Other key findings include:

Biggest tariff concerns – The top concerns are the impact on currency values (36%), high levels of uncertainty preventing major decisions from being made (34%), and counterparty risk in hedging transactions (33%).

Firms that don’t hedge are now considering it – Of the firms that don’t currently hedge their FX risk, more are considering hedging in 2025 (65%) than last year (51%). The top reason for not hedging was burdensome infrastructure, cited by 83% of firms, up from just 20% last year, suggesting they want to hedge but lack the tools.

FX option adoption – The use of FX options is becoming more frequent, with 86% of corporates now incorporating them into their hedging strategies.

Fresh FX challenges for corporates – Demonstrating best execution (33%) was the top challenge for North American corporates, followed by fragmented service provision (32%) and manual processes (30%). 94% also reported higher hedging costs, spiking from 73% in 2024.

FX goes digital – Firms are relying less on phone and email for booking FX trades. In 2025, 29% of firms use the phone to book FX transactions, down from 33% in 2024 and 35% in 2023. Just 24% use email for transactions, down from 27% in 2024 and 34% in 2023.

Shifting priorities – Corporates refocused their attention towards FX costs in 2025, with transparency of costs (34%) being the top priority, while automation (32%) and the credit ratings of FX counterparties (29%) also ranked highly.

The push for automation and AI – Every business surveyed was found to be considering automating parts of their FX processes, with the most popular use case being price discovery (34%). 100% also reported to be exploring how AI can be used to enhance their FX operations, and the top use case was found to be process automation (43%).

Outsourcing drive – 100% of firms outsource some part of their FX process. The main drivers are access to specialized expertise, enhanced efficiency and automation, and scalability and flexibility in operations (30%).

Eric Huttman, CEO of MillTech, commented: “Many corporate CFOs have traditionally treated FX like a duck in the corner of the room. They pay it little attention until it starts quacking loudly. In 2025, that quacking is impossible to ignore. North American businesses are facing an increasingly volatile landscape, with currency shocks and trade disruptions affecting their competitiveness and profitability.

“This has served as a wake-up call, and more firms are taking out insurance in the shape of FX hedging to protect their bottom lines, even despite hedging costs soaring. Many are reassessing their entire FX risk management infrastructure, ditching manual processes and adopting technology like AI and automating manual processes to improve speed, accuracy and decision-making.

“For too long, currency risk has been treated as a background issue, quietly managed by treasury teams while broader business priorities took centre stage. But in an era where currency swings can erase quarterly gains, proactive FX risk management is essential. Businesses can no longer afford to ignore the duck. It’s time to listen, prepare and build smarter, more resilient FX strategies.”