What does President Trump mean for emerging markets?

As part of Ti’s annual examination of emerging markets, our survey asks logistics professionals what single factor they believe will have the most significant impact on global economic and trade growth over the next 12 months. One of the possible answers is the outcome of the US election. With President Trump now a reality, we will be watching responses to that question with heightened interest.

So what does President Trump mean for emerging markets? At this stage, it seems prudent to put in the obligatory proviso that trying to predict the course of action of Donald Trump is somewhat difficult, but it is worthwhile to look at a few potential scenarios with some hard data in the background for context.

The most obvious way that Trump can affect other countries is through trade policy. Looking at the importance of the US as an export partner to a range of emerging markets, it comes as no surprise that Mexico’s export profile is more exposed to the US than any other emerging market. Over 80% of its goods exports by value in 2015 were to the US. No other country comes close to that figure, though there is a good deal of variation among other emerging markets. The labels on the graph display an estimate of non-bulk goods exports to the US as a proportion of total non-bulk goods exports. In most cases, the difference between this and the share of all goods is small, although there is a 5 percentage point difference for both Brazil and Indonesia, suggesting logistics providers exposed to non-bulk goods in these markets could be impacted disproportionately hard.


chart 1


Looking at how important US exports are to emerging market economies overall, it is clear just how potentially grave the situation is for Mexico. More than a quarter of its economy is accounted for by goods exports to the US. For Vietnam and Cambodia, the figures are in excess of 10%. For pretty much all other major emerging markets though, exposure is not nearly as high.


chart 2


Although it is not clear which country Trump may target the most with his trade policy (he has suggested withdrawing from the WTO), it seems a good bet that Mexico is at the head of the list.

He has threatened to scrap NAFTA, blaming the agreement for shipping American jobs overseas. He has talked about imposing tariffs of 35% on Mexican goods (although China is the leader in this category with 45%). Mexican central bank governor Agustin Carstens has stated than an “adverse” result in the election could hit the country like a “hurricane”.

And this doesn’t even consider the impact that any other comments or policies that the President has directed towards Mexico or Mexicans might have. While emerging markets everywhere will likely be buffeted by ‘Trump trade’, the misery for Mexico seems sure to be many times greater than elsewhere.

Source: Transport Intelligence, November 9, 2016

Author: David Buckby