Trump's Tariff Surge: A New Wave of Protectionism Hits Emerging Markets

A new report highlights the looming economic challenges faced by emerging economies, particularly in Asia, due to increased tariffs announced by US President Trump. Southeast Asia, Eastern Europe, and the Middle East are particularly affected, with anticipated declines in growth, savings, and foreign investments.

US President Donald Trump has announced significant tariff increases targeting emerging economies, notably in Asia, as detailed in a report by Systematix Research. The report indicates that Southeast Asia is expected to bear the brunt, followed by nations in Eastern and Continental Europe and the Middle East.

This measure, referred to as the "Liberation Day" tariff, is predicted to heavily impact emerging markets (EMs), echoing the rise in protectionism seen post-2008. The report forecasts several economic difficulties for these regions, including reduced growth differentials compared to developed nations, decreased real household incomes, and a significant drop in savings and investment rates.

Furthermore, heightened public debt, underperformance of the private sector, and a reduction in Foreign Direct and Portfolio Investments are noted as potential outcomes. Alarmingly, every 100 basis point decline in global trade openness can lead to a sharp reduction in per capita income and productivity for these economies.

The targeted 52 major countries, which contribute a substantial 66% to US imports, will now face an average tariff of 34.6%, while the other 170 nations encounter a minimum 10% tariff. The report indicates that for India, the surge in global protectionism is expected to result in diminished private capital expenditure, slower job creation, reduced disposable income, and rising public and household debt levels.

(With inputs from agencies.)