Mathieu Bortot, Portfolio Manager at Fiera Capital, joined Keith Black, Managing Director of RIA Channel, to discuss how President Trump’s economic policies may outline the future path of emerging markets economies.
Bortot notes that emerging market equities had strong performance during President Trump’s first term despite the significant tariffs imposed on China. As Chinese trade with the US declined, the country turned to focus on local industries and domestic consumption. The exports lost by China helped to grow the export economies of other countries, such as Vietnam and Mexico.
Today’s macroeconomic environment differs substantially from Trump’s first term. In his first term, interest rates were low and global economies were growing slowly. Today, interest rates and inflation are much higher than in Trump’s first term, and geopolitical conflicts add to economic uncertainty. Emerging markets countries will benefit from a declining risk premium if Trump is able to broker peace in Ukraine and the Middle East.
If Trump implements new tariffs in his second term, he will need to find deflation in other areas of the economy to make sure his legacy is not one of growing inflation.
Bartot predicts that the emerging markets countries that benefitted from Trump’s first term will continue to benefit from his policies in his second term. These include Vietnam, South Korea, India, and Mexico, all of which should continue to benefit from Trump’s posture on tariffs against China.
China leads the list of emerging markets countries with challenges, including domestic issues and looming tariffs from the Trump administration. While Trump’s trade agreements can be positive for any favored allies who are able to avoid tariffs, countries not included in the agreements can suffer economic hardships.
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