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As 2017 kicks off, there is a new-found optimism in the air, notably in America, and it is spreading. However, for Emerging Markets (EM), our economists are unconvinced that it will last.

The triumvirate of rising US trade protectionism, tougher immigration rules and a reassessment of US foreign policy positions seem to be at the heart of President Trump’s ‘America First’ goal. EM, with its trade-oriented economies and delicate geopolitics, are much more exposed to this than developed markets. EM, with its large debt, is also more exposed than DM to higher US rates and stronger US dollar.

Our analysts explain the challenges but illustrate in their risk scenario the peril of lumping all of EM together. Mexico’s economy is the most vulnerable, but once starting positions and policy responses are considered, Turkey is the hardest hit. Asia is likely to be more vulnerable than most people think, but is cushioned by large fiscal stimulus. The only EM that could benefit is Russia.  

Take a look at the below pie charts assessing the relative vulnerability of EM to Trumponomics:


Pie Charts AK v1.8


For further insights into the economic forecasts of various emerging markets, as well as our analysts’ FX and Rates outlooks, view the full report here. See page 34 for highlights from our recent investor survey, “What next from President Trump”.

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