After the solid performance of stock markets over the last six months, the US tariff announcements in early April are no longer at the center of investors’ concerns. However, their economic impact remains significant: signs of change in the dynamics of global trade are already emerging, a trend which, in all likelihood, is destined to continue in the coming months. This was underlined by Richard Flax, Chief Investment Officer of Moneyfarm.
China, USA and emerging markets
Let’s start with the data: if in 2022 the average tariffs on imports into the United States were estimated at around 1.5%, today they have increased to around 17%, with over 30 billion dollars in customs duties paid on a monthly basis. A heavy bill that someone, including exporters, importers and final consumers, must certainly pay. And the consequences are already visible: if you compare the total Chinese exports with those to the United States, you can already see how, while the former have continued to grow, the latter have decreased, a sign that Chinese companies have already found new (often “emerging”) markets to fill the gap.
the new map of global trade
We believe international trade should contribute to global growth, regardless of the winners and losers behind the aggregate data, and increased exports in emerging markets have historically correlated with earnings growth for companies in these areas (see chart below). Higher tariffs could curb the growth of emerging market exports in the future, but so far companies in these countries appear to have held up quite well.
The Moneyfarm view
To date, the implications of tariffs on the economy and inflation in the long term “have yet to be clarified, especially in the United States, where investments in Artificial Intelligence help to support the economy. A real restructuring of global trade chains is underway, in particular in relations between Beijing and Washington: it is a process that will take years to fully manifest its effects, but so far the emerging markets seem to be holding up, while Europe, in particular some sectors, such as the automotive sector, could be more affected by the situation”, he concludes the expert.
