The dollar divide: Can domestic firms close the gap?

Following a sharp devaluation of the dollar, multinational firms are outperforming domestically focused businesses by the widest margin in over a decade. Jim Lee, Executive Vice President, Americas, at Vistra, analyses whether domestic businesses can regain ground, and define the next chapter of corporate America.

2025 has brought unprecedented volatility to the US dollar. After sinking to a three-year low in June following the announcement of new tariffs, it rebounded sharply just a month later as clarity increased surrounding trade deals.

The first six months of the year were the dollar's worst first half since 1973, depreciating roughly 11% between H1 2024 and H1 2025. The effects have rippled across corporate America, leaving clear winners and losers.

There is now a significant divergence within the US market. Large multinationals are flying high, while domestically focused firms are barely keeping pace. The Goldman Sachs index of the 50 blue-chip US companies with the highest share of foreign sales exposure gained 21% this year. Meanwhile, businesses with the most domestic sales grew just 5%. It's the widest gap between domestic and multinational firms since 2009.

The question now is whether this is just a short-term imbalance, or will domestically focused companies be able to claw back ground against their globalizing peers?

Multinationals find silver linings

The devaluation of the dollar has delivered a clear windfall for US companies earning a significant share of their revenue abroad.

Multinationals have watched profits swell. Their overseas earnings are suddenly worth more, and their exports have become more competitive overnight. While S&P 500 companies generate around 41% of their revenue from outside the US, firms in sectors with more foreign exposure are benefiting the most. Tech companies have been the biggest beneficiaries, with 55% of their revenue from abroad, followed by materials (52%) and communications (49%).

However, these same dynamics have created a widening gap between global and domestic firms.

A turning point for domestic firms

This gap will not last indefinitely if domestic companies seize the moment.

The Fed's monetary policy pivoting towards several rate cuts provides one lifeline for domestic businesses. Lower interest rates mean that borrowing will be cheaper, making it easier to invest and grow domestically, while improving cash flow. Rate cuts can also drive increased consumer spending, with consumers facing cheaper loans and mortgages. Domestic retailers, service providers and manufacturers all stand to benefit from this. While currency effects have created short-term winners and losers, looser monetary conditions can help level the field.

More broadly, the global economy is showing signs of rebalancing toward services, a shift intensified by the disruptions to global goods trade. The services sector recorded its best calendar quarter so far this year, and has expanded for consecutive months in the US over the last year. China, which is facing similar headwinds in the goods trade, has also seen more growth in services, making investment in its services sector a key objective of its 15th Five Year Plan. These trends suggest that growth will be driven by adaptability and the reallocation of investment.

Now it's up to domestic players whether they can turn lower rates into real growth in this new economic reality.

Decisive action drives corporates

The turning point will come as business confidence shifts, and whether business leaders are willing to act.

Already, CFOs are more optimistic about their companies. Recent surveys from the Fed and Deloitte report this rebound. Two-thirds of US business executives surveyed by Vistra also said that they had accelerated investments in view of market volatility. Now is the time for investment and expansion, for both domestic and multinational firms.

47% of respondents said AI adoption and international expansion are equally important in driving business growth, suggesting that it's not just about where a company sells, but whether it's planning to invest for the future.

Businesses that act decisively, whether expanding in the US or overseas, can find themselves in a stronger position as interest rates fall.

However, those that hesitate will fall victim to ongoing risks. Trade rules that poselegal challenges, changes in H-1B visas, and the government shutdown, all inject fresh uncertainty. In an environment where volatility is the new norm, adaptability is key.

Momentum across industries, markets and regions remains steady. Continued business investment could further strengthen US growth, reinforcing economic resilience and driving employment across sectors.

Long-term business success will depend on leaders' ability to adapt to changes and navigate risks as they appear. The opportunity for action is there, and firms that act boldly will write the next chapter of corporate America.