Since the Republicans began their term on Jan. 20, emerging market investors have been navigating a complex landscape shaped by U.S. policy shifts. Trump 2.0’s list of proposed tariffs and immigration policy changes has started to make a significant impact on forex and global geopolitical dynamics.

Emerging countries with significant trade exposure to the United States, such as Mexico and China, are likely to be hit the most by this tariff plan. While Mexico has been threatened with a 25% tariff, Trump has proposed a 10% tariff on Chinese imports, a moderated stance compared to earlier threats of 60%. However, China’s recent breakthrough in AI with its DeepSeek AI Chatbot, which wiped billions off the valuation of U.S. tech companies in a single day, highlights a more fraught and complex trajectory for trade relations between the world’s two largest economies.

This environment is prompting investors to reassess their strategies, with some considering reallocating investments to markets less affected by U.S. trade actions. For instance, with growing U.S.-China trade tension, India’s geopolitical position seems favorable for a safer investment. Further, India’s market is largely domestically driven, making it less exposed to U.S. trade policies. Meanwhile, Brazil appears poised to gain from any trade tensions that redirect demand for agricultural products from Mexico.

The iShares MSCI Emerging Markets ETF rose 1.1% immediately following the policy announcements last week.

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Here, we present three emerging market stocks,MercadoLibre MELI, Yatra Online YTRA and WNS WNS, which are expected to gain in 2025, capitalizing on their solid prospects.

Emerging Market Trade Scenario at a Glance

The Trump administration's inclination toward protectionism in the form of “America First,” particularly through the imposition of tariffs, is a primary concern for emerging markets (EMs). The U.S. dollar, in fact, started strengthening following the election, a trend that is strongly impacting EMs, especially those with substantial dollar-denominated debt. Meanwhile, geopolitical factors continue to play a significant role in shaping investor sentiment.

It is quite clear that Trump’s second term has a far more challenging transactional strategy for China compared to the previous one. However, DeepSeek's emergence as a direct competitor to OpenAI's latest model sends a clear signal about China's ability to innovate and excel, even under the constraints of U.S. export restrictions. It underscores China's determination to achieve technological self-reliance and advance its global influence in critical industries like artificial intelligence. From an investment perspective, the implications are significant. The success of DeepSeek could attract a wave of funding into China's AI ecosystem, further fueling innovation and competition.

Other than China, countries with significant trade surpluses with the United States, such as Mexico, South Korea and Taiwan, may face sharp market pressure too. While Mexico might bear the brunt in the fields of automotive and agriculture, South Korea and Taiwan might face hurdles with their semiconductor exports as the U.S. promotes domestic chip manufacturing.

Meanwhile, Brazil, despite not being a direct target of U.S. trade measures, remains vulnerable to secondary effects stemming from global trade disruptions, particularly those involving China, its largest trading partner. In 2023, U.S. imports of goods and services from Brazil were $36.9 billion, down 2% from 2022 (U.S. Department of State report). This decline may aggravate in 2025 if there is no shift in trade interest found from Mexico, as stated earlier.

On the other hand, despite the Republicans’ tariff frenzy behavior, rumors are rife that U.S.-India economic ties will strengthen in 2025, leading to more opportunities for bilateral trade. As per IBEF (Indian Brand Equity Foundation), in fiscal 2024, India had a trade surplus of $36.8 billion with the United States. Experts believe that even under Trump 2.0’s higher tariffs, India is still in a position to retaliate well with counter-tariffs. Further, trade diversion from China might prompt U.S. companies to seek alternative suppliers to minimize costs. India, with its expanding manufacturing base and competitive labor costs, could emerge as a preferred option.

3 Emerging Market Picks

We have narrowed our search to the following three emerging market stocks based on a favorable Zacks Rank and solid metrics for the upcoming period.

MercadoLibre: This e-commerce and fintech services company is well poised to take advantage of increasing Internet penetration. With its advanced technological and commercial solutions, MercadoLibre addresses typical cultural and geographic challenges associated with operating an online commerce platform in this part of the world.

MELI carries a Zacks Rank #3 (Hold). Its 2025 sales and earnings growth rates are pegged at 22.5% and 33.3%, respectively.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MercadoLibre, Inc. Price

MercadoLibre, Inc. price | MercadoLibre, Inc. Quote

Yatra: This online travel and tourism operator based in India provides information, pricing, availability and booking facilities for domestic and international air travel, domestic and international hotel bookings and holiday packages, among others. The company sees significant opportunity within its existing customer base. With Global India's expertise, YTRA expects the MICE (Meetings, Incentives, Conferences, and Exhibitions) sector to grow at a double-digit rate, potentially 20-25% annually over the next 2-3 years.

Yatra carries a Zacks Rank #1 currently. Its fiscal 2025 revenue and earnings growth rates are pegged at 90.9% and 350%, respectively.

Yatra Online, Inc. Price

Yatra Online, Inc. price | Yatra Online, Inc. Quote

WNS: This India-based business process management (BPM) company provides data, voice, analytical, and business transformation services worldwide. WNS engages in diversified businesses, primarily manufacturing, retail, consumer packaged goods, media and entertainment, and telecommunication.

WNS carries a Zacks Rank #3 currently. Its fiscal 2026 revenue and earnings growth rates are pegged at 7.4% and 11.1%, respectively.

WNS (Holdings) Limited Price

WNS (Holdings) Limited price | WNS (Holdings) Limited Quote

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