Investing.com – Policy changes in the second term of Trump's presidency, including a sharp increase in tariffs on Chinese goods, could cause the (CNY) to depreciate by 10% to 15%, analysts said from JPMorgan.
JP Morgan predicts that US tariffs on Chinese goods could rise to 60% from the current 20%, with new levies targeting exports from Malaysia and Vietnam.
In response, China is expected to impose reciprocal tariffs, devalue the yuan and implement policy measures to support its economy. Despite these measures, China's GDP growth could decline by almost 1% in 2025, JPMorgan estimates.
Emerging markets (EMs), particularly manufacturing exporters such as Malaysia and Vietnam, are likely to face the most pronounced impacts, while India would be the least affected.
These countries could lose global market share as China redirects its exports to other emerging markets.
But commodity exporters may see limited effects as China is expected to increase storage and diversify imports through “matching friends” strategies.
Analysts have warned that American exceptionalism – through deregulation, lower taxes despite higher tariffs and reduced immigration – could weigh on emerging markets as the US economy becomes more insular.
A stronger dollar and tighter global financial conditions may further impact emerging market growth, with sharp currency depreciation creating inflationary pressures in some regions. However, large domestic slack in certain economies could keep inflation contained.
The note highlighted that India and LATAM exceeded expectations, with stronger economic growth than expected.
“The main risks are that US policy changes are not incremental but extreme, that China retaliates disproportionately, and that geopolitics complicate the impact,” the analysts noted. Still, the underlying resilience of emerging markets could help them weather pressures more effectively than in past crises.
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