WEATHERING THE STORM

US President Donald Trump's "Liberation Day" tariffs caused havoc for global markets, but there may be an upside for emerging markets with a trifecta of tailwinds picking up steam.

- Eliza Bavin

On April 2, US President Donald Trump unleashed the most aggressive tariffs the US had imposed in more than a century, sending global markets into turmoil.

The announcement included a 10% baseline tariff on imports from all countries, effective from 5 April 2025, alongside additional reciprocal tariffs on imports from 60 nations (Figure 1).

The effects were shocking for markets. Wall Street suffered its worst day since March 2020 with the Dow Jones down 3.9%, the Nasdaq plunged nearly 6% and the S&P 500 was down 5%.

Trump later put a 90-day hold on the reciprocal tariffs, keeping the baseline 10% in place, to go to the negotiating table with almost every country.

China, unsurprisingly, was excluded from the pause on reciprocal tariffs and the two nations are engaged in a fullblown tit-for-tariff trade war.

As China is a major part of most emerging markets portfolios, this element has investors concerned, but it's not all bad news - especially for those who planned ahead.

Robeco's head of emerging markets and lead portfolio manager of the Global Emerging Markets Core strategy, Wim Hein Pals made plans to lessen exposure to countries reliant on trade with the US prior to "Liberation Day".

Pals says his team had been working towards positioning their portfolio to be more defensive well and truly before the tariffs took effect, and not just within China, but the Asian region in general.

"We favour countries that are less exposed to the US in the first place, so no exports, or hardly any exports, to the US," he says.

"So, countries like India, South Africa, and the periphery of Europe Central Europe, Turkey and Greece come to mind.

But also, Latin America. So, we are currently positioned towards Latin America, emerging Europe and Africa, those regions we're overweight in the fundamental year portfolios, and we are underweight emerging Asia.