The dollar has fallen 10% under Trump. It helps big multinational companies but is a ‘hidden tax’ raising costs from vacations to groceries

The U.S. dollar is down about 10% since the start of Trump’s term and logged its steepest six-month decline in more than 50 years in early 2025. The weaker currency is helping multinationals like Philip Morris, Coca-Cola and InterContinental Hotels, but it is raising input costs for import-reliant businesses and adding pressure to consumers through pricier foreign goods, travel and items like coffee, which is up nearly 19% in the past year. Economists say only about 5% to 10% of a currency move typically passes through to U.S. consumers, but the effect is additive amid tariffs, fuel costs and broader inflation concerns.

Analysis

The key market implication is not a broad inflation shock, but a margin-transfer from domestic, import-exposed businesses to globally diversified franchises. The weak dollar is a quiet earnings tailwind for firms that translate foreign revenue back into dollars, while smaller operators without hedges will be forced to choose between absorbing FX pain or passing it through into prices and risking volume loss. That creates a second-order winner/loser split inside consumer staples and travel: global brands with pricing power can defend margins, while domestic distributors, specialty importers, and service businesses with foreign inputs become the squeeze point.

The larger macro effect is that FX is amplifying an already fragile consumer backdrop rather than driving it alone. Because pass-through is delayed and partial, the inflationary pressure should show up first in discretionary travel, imported consumables, and commodity-linked household items over the next 1-3 quarters, not as an immediate CPI spike. That argues for watching earnings revisions more than headline inflation prints: companies with weak hedging programs and tight inventory cycles will likely guide conservatively before they actually miss.

The contrarian view is that consensus may be underestimating how much of this move is self-correcting. If U.S. rates stay elevated relative to peers or growth data weakens abroad faster than in the U.S., the dollar can rebound sharply, which would unwind the “hidden tax” narrative and pressure crowded weak-dollar beneficiaries. Still, even if the dollar stabilizes, the damage is already partly embedded in 2H guidance because procurement, freight, and inventory decisions are made with lag, so the near-term risk/reward favors leaning into companies with explicit FX tailwinds rather than assuming the currency move is transitory.

Key Decisions for Investors

• Long PM / short domestic consumer-exposed retail basket for 1-2 quarters: PM has direct translation tailwind and should be able to reprice faster than import-dependent competitors; use the pair as a cleaner FX alpha expression than broad staples exposure.
• Add KO on pullbacks for the next earnings cycle: favor it versus purely U.S.-centric beverage/CPG names because international revenue translation should support FY guidance revisions even if volume stays soft.
• Selective long IHG vs short U.S.-only lodging/OTA names into summer travel data: weaker dollar supports outbound U.S. travel conversion for global hotel demand, but the better expression is the multinational operator with overseas revenue translation and more diversified geography.
• Avoid or short small-cap importers with thin margins and limited hedging for 3-6 months: the lagged FX hit can force price increases into a weak consumer, creating downside surprise risk before markets fully model the currency impact.
• If the dollar index retraces 3-5% from here, take profits on weak-dollar longs and rotate into U.S.-rate-sensitive assets; the fastest unwind risk is a renewed hawkish Fed or risk-off move that reverses the FX impulse within weeks.