Author: Jon Macapinlac, Director, International Banking

• Falling inflation and lower rates lifted business confidence despite ongoing trade uncertainty.
• Tariffs and currency swings reshaped global trade and increased FX risk.
• ISO 20022 and AI advanced payment efficiency and financial insight.

The past year in global banking can be summed up in one word: uncertainty. Economic, market and geopolitical volatility converged to make 2025 a turbulent ride for businesses and banks alike. As we near the end of the year, it’s time to reflect on changes in global banking, how they impacted businesses and what may lie ahead.

Inflation Falls, Business Confidence Climbs

Inflation fell in 2025 from a 10-year high of 7% in 2021, to around 2.5% in August, driven in part by the Federal Reserve’s decision to raise interest rates in 2024. As borrowing costs climbed, business growth stalled. But hope bloomed again in September of this year, when the Fed cut the federal funds rate by 25 basis points. More good news followed with predictions of a second decrease of 50 basis points to end the year.  

Suddenly, business outcomes looked up as borrowing costs softened and consumer sentiment rose. Small businesses in particular saw light on the horizon.

• Sales, profits and cash reserves climbed
• 63% of small business owners said they expected to meet or exceed financial goals this year.

Dollar Woes and Tariff Uncertainty Dominated

If falling inflation and interest rates alone could predict the future, we may have a more certain outlook on the year ahead. However, falling dollar values continue to exert pressure.  

A weakening dollar hit the biggest decline in more than 50 years in the first half of 2025. Under such conditions, we would typically expect exports to soar, as pricing becomes more favorable for foreign trading partners. What we received instead was a lesson on the impact of tariff uncertainty on global trade.

Example: The Soybean Market

The soybean market serves as a prime example. In April of 2025, China imposed retaliatory tariffs of up to 34% on many goods, including soybeans, in an ongoing trade dispute with the United States.

• China once accounted for 61% of U.S. soybean exports.
• Orders fell to zero in 2025 as pricing from countries with lower tariffs became cheaper.

Effects were felt across the agricultural supply chain. John Deere, for instance, reported a 9% drop in sales as farmers pulled back on spending.

Tariff Uncertainty and Spending Patterns

Tariff uncertainty also drove irregular spending patterns.

• Imports rose dramatically during the first quarter of 2025 as businesses seeking to get ahead of tariff surge pricing.
• Companies made advance purchases to shore up inventory.

Throughout the remainder of 2025, tariffs had an interesting impact on foreign-currency-denominated import prices. After a brief spike at the end of 2024, prices fell back to mid-2024 levels but remained above earlier baselines.

The lack of pricing growth suggests that exporters are not absorbing the costs of higher tariffs, but instead, are passing them onto buyers. When combined with a weakening dollar, American importers are paying more for some foreign goods.

Tools to Manage Risk

To cope with these pressures, many businesses are turning toward:

• Forward contracts, which lock in exchange rates for a purchase in advance. By setting a fixed rate for future currency transactions, companies can protect profit margins by reducing the impact of FX risk.
• Letters of credit (LCs), which play a similar role in reducing payment uncertainties. LCs guarantee that the exporter will be paid by offering a bank guarantee on behalf of the buyer. LCs are a valuable tool in times of trade pricing volatility because exporters are protected from non-performance, while importers are also protected from paying for goods that never arrive.

Payments Take a Leap Forward

The payments landscape continued to evolve this year with the implementation of ISO 20022. Replacing older fragmented messaging systems, ISO 20022 is standardizing data formats by using a universal language for all electronic payments activity.

Businesses benefit from this by:

• Gaining richer data insights.
• Reducing overall costs.
• Streamlining reconciliation.

ISO 20022 also holds promise for the future as artificial intelligence (AI) takes center stage. Structured inputs from ISO 20022 make it easier for AI tools to improve processes across an organization, particularly where accounts payable and accounts receivable are concerned.

AI can automate invoice processing and improve fraud detection, but it’s also helping to save businesses hundreds of hours a month on cash forecasting.

By analyzing historical trends and patterns against real time data and automating tasks, AI has improved cash forecast accuracy by as much as 30%. According to Gartner, 58% of finance functions now incorporate some form of AI.

As we look back at the year, AI may stand as a paradigm for the future, representing the efficiency and innovation business organizations will need to survive in uncertain times.

Looking Ahead

As innovation and uncertainty continue to shape global banking, businesses need trusted partners to help them adapt and thrive. FNBO’s Global Banking team takes a proactive, relationship-driven approach, keeping clients informed of market shifts, identifying emerging opportunities such as near-shoring and advising on strategies to manage global risk.

By understanding each client’s unique needs, we deliver tailored insights and solutions to help businesses move forward with confidence in an evolving global landscape.

Contact our Global Banking team for support in navigating uncertainty and developing new opportunities.

About the Author
Jon works with external partners to discover and deliver the best global banking and risk mitigation solutions to our clients. Jon enjoys building business relationships and ensuring that his customers have the knowledge and services they need to succeed.

FNBO Global Banking Directors Kalli Heupel and Jim Urbach contributed to this article.