Since April 2025, the Trump administration has been negotiating bilateral trade agreements country by country. The pattern is clear. Countries with trade surpluses are being asked to allow their currencies to appreciate towards parity as part of discussions on tariffs and market access.
This is not a dollar devaluation. This is a currency fix that is negotiated one country at a time.
In April 2025, the administration explicitly included the “currency issue” in negotiations with Japan. The euro appreciated by 13% in 2025, and the renminbi by 4.3%. The yen rose from 160 yen to the dollar at the beginning of 2024 to 140 yen by April 2025, and has since regained some appreciation.
These are not market accidents. They are the result of negotiations. And they create a fragmented monetary landscape that turns exchange rates from a technical variable to a core strategic issue.
why is this happening
For decades, countries with trade surpluses artificially undervalued their currencies in order to increase exports. Through this model, China accumulated a trade surplus of $7.4 trillion over 15 years. Japan, Germany, and other countries adopted a similar strategy. The result is a large and persistent trade imbalance.
President Trump's bilateral negotiations are returning these currencies to their fair values. This will be done through country-by-country agreements that rebalance trade, rather than devaluing a single dollar.
Here are five key questions CEOs and CFOs should ask to ensure FX becomes a strategic advantage rather than a hindrance to real growth.
Question 1: When does currency become central to strategy for CEOs and boards of directors?
A currency reaches CEO territory when three conditions are met:
First, pricing power varies from country to country. You can't unify your pricing strategy when the euro is rising 13%, the yen is volatile, and the renminbi is fluctuating 4%. German competitors face different margin pressures than Japanese competitors. You lose if you treat FX as one global adjustment.
Second, supplier economic conditions change faster than contracts can be reset. Consider a U.S. manufacturer sourcing parts from Mexico. The peso appreciates towards parity. Input costs increase in dollar terms. However, your sales contract was signed six months ago. By the time you renegotiate, the advantage has reversed.
Third, foreign competitors are facing currency appreciation and are actively restructuring. When Germany's fiscal expansion caused the euro to rise by 13%, German manufacturers did not remain silent. They accelerated automation. They have permanently reduced costs. They used exchange rate pressures as a coercive function to increase competitiveness. On the other hand, if you're celebrating dollar-based earnings growth without reinvesting, you'll be left behind.
At that point, FX is no longer a financial variable. It determines who keeps the margin, who can invest, and who lags behind.
Question 2: What are the first three strategic assumptions that CEOs and CFOs should address?
If currency parity correction continues through bilateral negotiations, three assumptions built into most plans will be undermined.
Assumption 1: “This will revert.”
Bilateral currency gains from trade negotiations are not easily reversed. President Trump has shown a willingness to implement the agreement. When Japan agreed to allow the yen to appreciate from 160 yen to 140 yen, it was not a temporary market fluctuation. It was a negotiated shift. When Germany's fiscal expansion and trade rebalancing boosted the euro by 13%, it reflected structural change rather than cyclical noise.
Companies that wait for “normalcy” will fail.
Assumption 2: “Reported profits reflect actual performance.”
As currencies correct toward parity, U.S. companies' reported revenues and profit margins in dollar terms increase. The European subsidiary generates 13% higher revenue in dollar terms from translation alone. Unless leadership eliminates currency effects, teams will be rewarded for currency movement rather than execution.
I've seen this over and over again. The bonus was paid. A promotion was held. Investment approved. All prices are based on inflated numbers due to FX conversion. After that, the currency will stabilize. “Performance” disappears. And executives are realizing they were celebrating accounting, not strategy.
Assumption 3: “Competitors face the same conditions.”
it's not. U.S. companies competing with German and Japanese companies face three different currency environments. German competitors coped with a 13% euro appreciation. Japanese competitors have successfully weathered the yen's fluctuations from 160 yen to 140 yen to 156 yen. Chinese competitors managed a 4.3% renminbi appreciation under strict government control.
Each competitor rebuilt it differently. Each has different cost pressures. Each has different pricing flexibility. Assuming a uniform situation will lead to misreading the battlefield.
Question 3: How should leaders rethink where value is created and captured?
Currency fragmentation creates a period in which American companies can dramatically increase their strategic position on a country-by-country basis.
Example: $750 million auto parts supplier
Consider an auto parts supplier based in the United States, with factories in Ohio and Mexico, and customers in North America and Europe.
As the euro and peso rise towards parity:
- Sales in Europe will increase on a dollar basis. Earnings look solid.
- Labor costs in Mexico will rise after adjusting for the dollar. Input costs increase gradually.
- German competitors, facing a 13% appreciation of the euro, are accelerating automation and permanently reducing costs. they look slimmer.
On paper, U.S. companies' profit margins are improving. in fact:
- Input costs are rising
- Price discipline weakens because “performance is good”
- German competitors are actively reinvesting
If management celebrates EPS gains instead of reinvesting in productivity, pricing expertise, and market position, that advantage can be reversed within two years.
But playing smart is different.
US companies use FX windows to:
- Fix European distribution relations before currencies stabilize
- Investments in automation that match German competitors' cost-outs
- Train your sales team to sell based on value rather than currency price advantages
- Build pricing capabilities that can be adjusted by country according to currency fluctuations
- Let's establish a foothold in Germany and gain market share while the euro remains strong.
- Find adjacent customer segments in markets vacated by currency fluctuations
This is the window. Use it or lose it.
Where value is actually created:
When currencies correct toward parity, value is created by:
- Faster investment in productivity and automation. Not next year. now. While there is FX-driven cash flow margin.
- Build a pricing unit to handle country-specific passthroughs. Not world-class pricing. Country-specific pricing expertise.
- Train your employees to sell on value, not price. FX is not always advantageous. Lock in customers on switching costs, service and innovation.
- Increased physical presence in trading partner countries. Speed is key. Our competitors are doing this. You should too.
- Secure a distribution base before the currency stabilizes. These create durable market shares that withstand exchange rate reversals.
- Find adjacent customer segments. Currency shifts open up new market segments that were previously unprofitable. Please find it soon.
Question 4: How will currency parity corrections affect capital allocation over the next 3-5 years?
Over the next three to five years, currency parity corrections will change capital allocation more than most CEOs expect.
We will promote investment in:
Productivity and automation. If the euro rose 13% and Germany's competitors took advantage of that pressure to automate, we would need to match that. Not within 3 years. now. FX windows provide cash flow. Use this to permanently reduce your cost structure.
Innovation and new products.Reevaluate your product portfolio. Use next-generation products that incorporate AI. Companies that innovate during currency exchange periods secure differentiation that survives currency reversals.
Supply chain resilience. When currencies are adjusted to parity, imports from some countries become more expensive in dollar terms. Companies that diversify their supply chains and build in redundancy will survive this situation. Companies that continue to concentrate in one country will be under pressure.
Ability to lock in switching costs for customers. service. Integration. data. Customization. Anything that makes it difficult for customers to leave. This is because when FX becomes stable, the price advantage disappears. Switching costs remain.
Decrease or delay priority:
Stock buybacks triggered by EPS inflated by exchange rates. If currency translation increases profits by 10%, repurchasing stock is an accounting gain, not a performance.
Investment based on currency stability. Multi-year capital projects that incorporate current currency assumptions are vulnerable. Stress test against a 10% currency change in either direction.
Question 5: If you were advising a CEO-CFO pair today, what decisions should they revisit in the next 90 days?
Pricing.
Specifically, pricing expertise, authority, accountability, and cash flow impact.
Why set prices?
This is because corrections in currency parity immediately create price pressures that cannot be addressed in annual cycles. National managers lack perspective. Finance has no authority. And with each month of delay, the margin leaks out.
Things to do within 90 days:
Centralize pricing. Pull pricing authority away from national GMs and into a central pricing department that has a holistic view of the entire currency.
Reduce pricing reset cycles. For high-exposure products, move from annual price reviews to quarterly or monthly reprices.
Define explicit FX passthrough rules for each country. It's not a global rule. Country-specific rules. In Germany, how much euro strength can they absorb before raising prices? In Mexico, at what peso level will they renegotiate their supplier contracts? Write it down.
Restructure the S&OP mechanism and its decision rules. Sales and operating plans should include currency scenarios. What changes if the yen changes by 5% in 30 days?Decision rules must be clear.
Introducing a new frame of decision rules for your supply chain. As the currencies of trading partners appreciate, more cash is used in supply chain decisions. You need real-time visibility and clear rules.
Build a weekly cash flow monitoring tool. Not every month. Every week. Currency moves quickly. Cash flow visibility must match its speed.
conclusion
Correcting currency parity through bilateral trade negotiations will not be achieved with a single announcement. They would arrive one negotiation at a time. One currency at a time. One supplier at a time.
Companies that recognize this early and act quickly will take advantage of the FX window and get on a higher sustainable growth trajectory.
Companies that wait will realize that their “performance” was accounting. And while they were celebrating, their competitors also restructured.
The time is now.
CEOs and teams must rehearse. Make appropriate organizational changes. Many pricing models are available worldwide to stimulate your thinking. The CEO's hands-on leadership energizes the company and its ecosystem.
The question is whether your company will seize the opportunity or fall victim to it.
