EM currencies strengthen, stocks weaken due to US tariffs, impacting global markets

From Yahoo Finance: 2025-04-03 16:51:00

Currencies from developing nations saw their best day in over two weeks as President Trump’s tariffs caused the greenback to plunge. Emerging stocks in Asia slid due to the levies’ impact. The MSCI index for emerging-market currencies gained 0.1% as the dollar fell, with countries like Mexico, Brazil, and Chile outperforming peers.

The Bloomberg dollar index experienced its worst day since November 2022, dropping about 1.5% amid concerns about Trump’s trade policies affecting US growth. Traders are predicting four rate cuts by the Federal Reserve by year-end. Currencies from Eastern Europe led emerging-market gains against the dollar, despite a decline versus the euro.

Asian markets were hit hard by Trump’s tariffs, with the total tariff rate against Chinese goods rising to 54%. China’s credit score was downgraded by Fitch Ratings to A, citing weakening public finances and rising debt. Some countries faced significant levies on exports, leading to stock tumbles and currency declines.

South African stocks plunged the most in three years due to high levies, impacting corporate profits and the economy. In contrast, Latin American shares rallied, with Mexico’s stock market soaring. Mexican President Sheinbaum plans to continue negotiations with the US on steel and auto tariffs. Investors fear global trade disruption and retaliation risks from the tariffs.

Developing nations are expected to negotiate with the White House to reduce the impact of the tariffs. Thailand and Vietnam plan measures to cushion the blow on manufacturers and exporters. Close US allies like Hungary face economic challenges due to heavy reliance on car production. Rate markets experienced repricing, with the US 10-year yield falling below 4%.

In Latin America, Mexico and Brazil saw a decline in swap rates as traders anticipate rate cuts amid weaker global growth. Emerging-market strategist Ning Sun highlights the challenges for EMFX if global growth slows. The impact of Trump’s tariffs is felt worldwide, with many countries reevaluating their economic strategies to mitigate the effects.

Read more: EM Currencies Rally, Stocks Slump on US Tariff Shock Repricing