From Yahoo Finance: 2025-04-07 16:56:00

Emerging-market assets plunged on Monday, erasing year-to-date gains due to fallout from Trump’s trade policies. MSCI’s main emerging equity index dropped 7.9%, China retaliated with tariffs, and EM currencies fell 0.6%. Global markets were taken aback by the extent of tariffs, with predictions of a possible recession and increased rate cuts.

Morgan Stanley advised investors to increase bearish bets on EM currencies and suggested focusing on local debt and interest-rate swaps. The US tariffs could severely impact developing nations’ trade and economies, with hard currency bonds from countries like Pakistan and Sri Lanka being hit hard. The EU is proposing tariffs on US goods in retaliation for aluminum and steel levies.

Beijing retaliated with tariffs on US imports, causing Chinese shares in Hong Kong to drop 13.8%. The People’s Bank of China weakened the yuan, sparking speculations of devaluation. Latin American currencies fell, with the Colombian peso dropping 3% and the Brazilian real hitting a low. Central banks worldwide intervened to defend their currencies amidst the market turmoil.

Global markets briefly recovered after reports of Trump considering a tariff pause for all countries except China. This news, later dismissed as “fake,” provided some relief before fading. Analysts warned against buying risk based on such news. The volatility in markets continues to pose risks for investors as trade tensions persist.

Read more: EM Stocks Erase 2025 Gain as Tariffs Fuel Worst Day in 17 Years