Title: How Tariffs Affect Foreign Currency Exchange Rates and Businesses | American Express
Headings: 
How Tariffs Affect Foreign Currency Exchange Rates, Importers, and Exporters
The Relationship Between Trade Tariffs and Foreign Currency Exchange Rates
How Import Tariffs Raise Foreign Currency Exchange Rates
How Import Tariffs Affect Export Businesses
The
Takeaway:
The Author
Frances Coppola
Sources
Make International Payments
Terms and Conditions
Article (s) on this website that are identified as being prepared by third parties are made available to you for information purposes only. These third party articles do not represent the opinions, views or analysis of American Express and American Express does not make any representations as to their accuracy or completeness. If you have questions about the matters discussed in those articles, please consult your own legal, tax and financial advisors.
NMLS ID # 913828

Content: these businesses would find their input costs rise due to tariffs, but the rising foreign currency exchange rate would tend to negate the effect, as described above. However, invoicing foreign customers in dollars when the U.S. dollar exchange rate is rising increases revenue, cash flow, and credit risk for U.S. businesses. When foreign customers’ cost of imports from the U.S. increases in terms of their local currency, they tend to cut back purchases. They may also delay payment in the hope that the exchange rate falls. Some may even default on payments if they experience difficulties obtaining dollar finance. For exporters, therefore, import tariffs may cause a significant fall in revenue. This applies whether or not U.S. exporters actually use foreign currencies themselves. The
Takeaway: Import tariffs effectively divert dollars from forex markets to the U.S. government and domestic economy. As a result, the international supply of dollars shrinks, causing the U.S. dollar’s foreign currency exchange rate to rise.