Analysis-Emerging economies brace for Trump tariff 'turning point'

Rae Wee, Karin Strohecker, Libby George

Thu, Apr 3, 2025, 7:59 AM 4 min read

By Rae Wee, Karin Strohecker, Libby George

SINGAPORE/LONDON (Reuters) -Emerging economies worldwide are bracing for sliding currencies and a imaginable deterioration of their sovereign recognition aft U.S. President Donald Trump's tariffs brought levies connected U.S. imports to their highest levels successful 100 years.

The worse-than-expected tariff blitz hits Asia -- and immoderate of the world's poorest nations -- the hardest. It could people a antagonistic turning constituent for emerging marketplace indebtedness conscionable arsenic galore nations had hoped to lure investments aft years of hazard aversion.

"We are instantly acrophobic by the imaginable interaction of the terrible tariffs imposed connected a scope of emerging economies — an attack which risks further damaging the improvement prospects of countries already facing worsening presumption of trade," said John Denton, Secretary-General of the International Chamber of Commerce. He added that the shifts could origin a cascade of sovereign standing downgrades.

Trump unveiled the sweeping acceptable of penalties arsenic precocious arsenic 50% connected allies and antagonists alike, roiling fiscal markets and stoking fears of a planetary commercialized war.

The tariffs, which adhd to existing levies, volition deed everything from Madagascar's vanilla, astatine 47%, to Sri Lanka's textiles astatine 44%.

"The daze to sentiment and superior flows is apt to endure and requires higher hazard premia," concern slope JPMorgan said successful a note, downgrading its stance connected emerging marketplace currencies to "underweight" and calling a imaginable turning constituent for emerging marketplace debt.

Emerging markets had lone past twelvemonth started to reverse a decade-long deterioration successful recognition ratings pursuing a question of defaults, which was accelerated by the fallout from COVID-19 and was a cardinal operator of rising borrowing costs.

U.S. concern slope Goldman Sachs said tariffs would adhd a 1 percent constituent resistance to GDP maturation successful China, the world's second-largest economy, which could person a knock-on effect connected wider emerging markets.

The International Chamber of Commerce's Denton likened the interaction to the devastating 1970s vigor crisis, which deed the planetary system and roiled a swath of emerging marketplace assets.

Some investors said tariffs could fundamentally displacement however they attack emerging marketplace bets.

"If the tariffs stay arsenic it is, we decidedly request to deliberation astir the structural, export-oriented maturation communicative for EM," said Gary Tan, a portfolio manager astatine Allspring Global Investments.

"If this exemplary is broken, past decidedly we person to reconsider how, basically, you put successful EM for growth."