China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

Trump’s disastrous message to emerging markets

April 3, 2025

It finally came true: President Trump has now published his devastating list on tariffs for American imports from all countries. This is terrible news to all countries in the world – in my view the U.S. included! Both theory and practical experience reject trade protectionism as extremely harmful and underline that the American president does not understand macroeconomics – or does not care about it.

Not all emerging markets are major importers of the U.S. – but quite a number of them are indeed. The biggest are by size (in USD and the percentage of Trump’s new tariffs):

                                       Volume (in bill USD)                              Tariff (in %) *

Mexico                        510.0                                                                no new tariff, already targeted

China                          462.6                                                                34  (54 including previous tariffs)

Vietnam                     142.5                                                                46

India                               91.2                                                                26

Thailand                       66,0                                                                36

Malaysia                      53.9                                                                 24

Brazil                             44.2                                                                 10

Indonesia                    29.6                                                                 32

Colombia                    18.4                                                                 10

Chile                              17.4                                                                 10

South Africa               14.8                                                                  30

Philippines                  14.6                                                                 17

Cambodia                   13.4                                                                  49

Costa Rica                  12.0                                                                  10

Peru                                10.0                                                                   10

Source: Country list of the White House, https://www.newsweek.com/trump-reciprocal-tariff-chart-2054514 and Trading Economics. However, the list of the White House is not quite transparent and obviously based on uneven criteria.                                                                                                                                                —————————————————————–

Conclusion:  The table above should indicate clearly that the high new tariffs set by the U.S. will have considerable direct negative effects on exports from many emerging markets to the United States. But there will also be strong indirect negative consequences on many emerging countries because of dampened total global demand. Thus, emerging markets must find new market alternatives for their exports to countries outside the U.S. Candidates for this changing focus are obviously other emerging markets and hopefully the EU. It also will be interesting to see how China and Russia will react on this new situation.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University

Värdiga pristagare – deserving laureates

October 14, 2024

Årets ekonomipris till Acemoglu, Johnson är ett klokt val. Har själv tillämpat deras forskningsresultat i min egen forskning och föreläsningsverksamhet sedan en längre tid tillbaka, speciellt för att understryka institutionernas betydelse för utveckling, välfärd och tillväxt. Intressant är också att Acemoglu på sistone också hänvisat till risker som är förknippade med AI-utvecklingen.

Acemoglu, Johnson and Robinson really deserve the “Nobel Prize” in economics with their institutional research. I use their research results a lot, particularly when it comes to my research on emerging markets.  Interestingly, Acemoglu also has published conclusions about neglected AI risks.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University

Emerging markets and a strong dollar

May 27, 2024

Emerging markets are usually more sensitive to weak current account balances than advanced countries. A deficit in the balance on current account urges for a currency inflow since it implies a debt for imports vis-a-vis other countries that has to be paid. This inflow can be done in the three following ways:

¤ by receiving currency reserves via foreign direct investment (which often does not work as an available or sufficient financial source),

¤ by borrowing money in foreign currency (mostly in U.S. dollar, USD), or

¤ by selling stocks, bonds, etc to foreign investors (if such financial products exist in the emerging country and foreign demand for these papers is there).

Statistics show that emerging markets borrow the lion share of their foreign credits in USD which may be challenging in times when the American dollar is strong on global currency markets. This is actually the case. Serving existing debt in USD uses to be even much more challenging.

By the way: During a meeting the other day with American financial analysts, I heard the view that the USD historically tended to be strong when investments in research and development (R&D) in the U.S. were high. This is explained by an increasing demand for American technology stocks and also foreign action for FDI in the U.S., thus leading to a high demand for the dollar and therefore to the strengthening of the American currency. I am not quite sure about the general validity of this suggested correlation. But it can be observed that such conditions can be found these days.

Back to emerging markets. What we can see today is an increasing willingness of certain emerging markets to avoid or decrease new borrowing in USD. However, this is not easy to achieve since USD markets function by far as the biggest global supplier of new loans, also to emerging markets. 

The ongoing situation with the strong dollar is, of course, particularly difficult for emerging countries with high indebtedness in USD. Such countries may be found in all continents – countries that are or have been reporting growing pressure on their currencies in 2024 such as the Nigerian Naira, the Egyptian Pound, the Turkish Lira, the Indonesian rupee, the Argentine peso or the Brazilian real (watch for this the following IMF table: https://stats.bis.org/statx/srs/table/e2?m=USD). Of course, some of these and other weak currencies of emerging markets have also been impacted by other negative factors than the strong dollar, for example domestic political ones.

At the same time, there are also countries trying to reduce their exposure to the dollar (which also can be seen in the IMF table quoted above). Indonesia is such an example. However, such a trend will not be easy to achieve – but Thailand actually managed it in the past few decades. Perhaps another option may gain momentum as it is currently the case in South East Asia, i.e. trying to expand borrowing within the region at the expense of the USD.  

Conclusion: Analysts of emerging markets should watch the further development of the USD and its impact on indepted emerging markets.

Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
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