tariff fears trigger emerging market fund's steepest drop since 2020

2025-04-04 general

New York, Friday, 4 April 2025.
The iShares MSCI Emerging Markets ETF (EEM) plunged to its lowest level since March 2020. Escalating trade tensions, particularly concerns about Trump’s tariffs, spooked investors. China’s announcement of a 34% retaliatory duty on U.S. imports exacerbated the downturn. JPMorgan Chase downgraded emerging market currencies. A trade war could hit emerging markets harder than the U.S. because exports make up a bigger share of their economies. Latin American assets face a rout. Some companies are planning to move production.

emerging market decline

The iShares MSCI Emerging Markets ETF (EEM) experienced a significant downturn, marking its worst session since March 2020 [1]. The fund closed 5.56% lower on Friday, culminating in a 7.29% drop for the week [1]. Year-to-date, the fund is down nearly 3% [1]. These losses reflect growing investor anxiety surrounding potential trade restrictions and their impact on emerging economies [1]. The downturn highlights the sensitivity of emerging markets to shifts in trade policy and the resulting adjustments in investor sentiment [1].

tariff impacts and market reactions

Trump’s announcement of increased tariffs has already sent ripples through global markets [7]. The plan includes a 10% across-the-board tariff and reciprocal tariffs, potentially reaching up to 54% on China [7]. JPMorgan Chase analysts anticipate that over a third of emerging market companies will face significant impacts following the tariff implementations [4]. Their analysis suggests that 36% of companies covered by the CEMBI Emerging Market Corporate Debt Index could be affected, with 16% facing major shocks [4].

expert opinions on trade war consequences

Torsten Slok, Apollo Global Management’s chief economist, suggests a prolonged trade war would disproportionately affect the rest of the world compared to the U.S [1]. He argues that the higher percentage of exports and imports relative to GDP in many countries makes them more vulnerable [1]. JPMorgan Chase downgraded emerging market currencies to ‘underweight,’ citing that the announced tariffs exceeded worst-case expectations [3]. The firm anticipates continued impacts on market sentiment and capital flows, necessitating higher risk premiums [3].

latin american market slump

Latin American assets are experiencing a considerable sell-off, leading the emerging markets rout [6]. Currencies in Chile, Brazil, and Colombia have each tumbled over 3% against the dollar, while the Mexican peso fell by 2.6% [6]. A Latin America stock gauge slumped almost 7%, pulling the MSCI emerging markets index down as much as 1.8% [6]. This sharp reversal underscores the immediate and severe impact of tariff-related anxieties on investor confidence in the region [6].

company strategies for tariff mitigation

Several publicly listed companies are proactively addressing the U.S. tariff measures [2]. Mindray Medical has been closely monitoring U.S.-China tariff policies and implementing response plans [2]. The company strategically stocked up on goods in the U.S. before the tariffs took effect [2]. Quectel Wireless Solutions is closely monitoring policy changes and exploring various measures, including business negotiations and overseas production, to ensure stable operations [2]. Companies are also diversifying into new markets [2].

Bronnen

emerging markets tariff impact