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HOW EMS COULD FARE IN THE EVER-CHANGING US TRADE POLICY - S&P GLOBAL RATINGS

Caught in the crosshairs of U.S. President Donald Trump's trade and tariff policies, researchers at S&P Global Ratings explain how emerging markets $(EM)$ economies could fare in the current macro environment.

"While more tariff announcements are expected in the coming weeks, the uncertainty alone is likely to dampen investment (in emerging markets)," S&P Global Ratings economists and credit researchers wrote in a note dated March 12.

S&P Global Ratings said that if Trump's trade policies have a negative impact on the U.S. economy, that in turn would increase downside risk for EM economies, such as those in Latin America because of their strong linkage to the American one.

The 25% tariff on steel and aluminum imports that came into effect on March 12 should have minimal impact on EM economies, barring a few exceptions as the share of U.S. exports amongst the biggest exporters of the materials stands less than 0.5% of their GDP, according to S&P Global Ratings calculations.

Asian emerging markets have wider tariff differential and trade surpluses with the United States, leaving them more vulnerable to potential scrutiny and "reciprocal tariff action" by the U.S. - examples being India and Thailand.

The risk are more mitigated in EM EMEA and Latin America, as these countries - barring the exception of Mexico - have trade deficits with the United States and relatively small tariffs differentials, with some even being negative, an example being Poland and Turkey.

(Shashwat Chauhan)

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