In an interconnected world, the flow of goods and services hinges on the shifting values of currencies. As exchange rates fluctuate, the costs, competitiveness, and alignment of nations evolve, reshaping global trade.

Dominance of Key Currencies in Trade Invoicing

For decades, the U.S. dollar and euro dominate international invoicing, accounting for over 80% of global trade bills. The dollar’s reach extends far beyond America’s borders, representing 96% of invoicing in the Americas, 74% in Asia-Pacific, and 79% elsewhere.

Within Europe, the euro holds sway over 66% of invoices, reinforcing its regional leadership. By contrast, the renminbi’s use remains modest—still under 2% of trade invoicing globally—though its adoption is rising in Asia-Pacific and select European markets.

Geopolitical shifts also influence currency choice. Nations distancing themselves from Western systems—such as Russia, Belarus, Kyrgyzstan, and Uzbekistan—have reduced their USD/euro invoicing shares by 10–50 percentage points between 2015 and 2023, reflecting currency as a tool of geopolitical influence.

Currency Movements Shaping Trade in 2025

The dollar’s trajectory in recent years offers a case study in how exchange rates affect commerce. After strengthening by 9% through 2024 on the trade-weighted index, it weakened 5.1% from year-end 2024 to April 2025.

Notably, the dollar fell by 8.8% against the euro, 9.4% against the yen, and 9.3% against the Swiss franc, while gaining 2.4% versus the Vietnamese dong. Such swings have concrete impacts on importers and exporters.

• U.S. importers face higher costs for foreign goods, with imports forecast to decline by 20% year-over-year in the second half of 2025.
• U.S. exporters benefit from cheaper goods abroad, pushing demand higher but risking retaliatory tariffs and increased input costs.

In May 2025, U.S. exports stood at $279.0 billion, down 4% month-over-month; imports were $350.5 billion, down 0.1%. The goods and services deficit rose to $71.5 billion, an 18.7% increase from April.

Protectionist Policy Shocks and Supply Chains

In 2025, U.S. protectionist measures introduced a 104% tariff on Chinese imports and a baseline 10% tariff on all imports. These policies have accelerated dollar weakness, driven up trade costs, and sparked retaliation.

Such policy shocks reverberate through global supply chains. Firms must navigate higher trade costs and market volatility, adjusting contracts and hedging strategies amid uncertainty.

2025 Trade Flows: Winners and Losers

The first half of 2025 saw global trade expand by $300 billion, led by a 14% surge in U.S. imports and a 6% jump in EU exports. Developed economies reversed prior trends favoring emerging markets.

In contrast, developing economies saw imports decline by 2%, and South–South trade stagnated. Africa outpaced other regions, with exports up 5% and intraregional trade rising 16% year-on-year.

Central Bank Influence and Currency Cycles

Exchange rates often follow predictable multi-year currency cycles. The current U.S. dollar cycle inflected in early 2025, influencing trade negotiations and portfolio allocations.

Central banks—particularly the U.S. Federal Reserve, European Central Bank, and People’s Bank of China—play decisive roles. Their interest-rate paths and reserve-asset policies ripple through payments, loans, and investment systems worldwide.

• Reserves composition remains heavy on the dollar, with modest shifts toward the euro and minor increases for the renminbi.
• Monetary policy divergence among major economies amplifies volatility, affecting hedging costs and trade contract stability.

Emerging Risks and Long-Term Outlook

Downside risks loom as tariffs, protectionism, and currency swings threaten to undermine global growth prospects. The most restrictive tariffs in a century have cut growth projections and fueled recession fears.

Yet long-term shifts continue. Select nations pursue de-dollarization, while the dollar retains its “exorbitant privilege,” underpinned by enduring trust in U.S. financial markets and institutions.

Conclusion: Navigating a Shifting Currency Landscape

The interplay of currencies remains central to the health of global trade. From the dominance of the dollar and euro to the rising—but still limited—role of the renminbi, exchange rates shape costs, competitiveness, and strategic alignments.

As policymakers adjust tariffs and central banks fine-tune monetary settings, businesses and governments must stay agile. Effective hedging, diversified invoicing strategies, and a keen understanding of currency cycles will be essential tools in a world where every fractional move in exchange rates reverberates across continents.

Ultimately, those who master the dynamics of currency and policy shifts will unlock new opportunities, mitigate risks, and chart a more resilient course through the ever-evolving terrain of global commerce.