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The coming term of Donald Trump as the 47th US president will be a hairy one for the economies of China and the emerging markets, according to popular opinion. Sean Taylor, Chief Investment Officer and portfolio manager of Asia and emerging markets expert Matthews Asia, disagrees.

‘It will take a while for the global macro landscape that will be characterised by ‘Trump 2.0’ to emerge,’ writes Taylor in his latest commentary. ‘But at this stage, we don’t think it’s a foregone conclusion that there will be a sharp headwind for emerging markets.’

With regard to the threatened US tariffs of 60 per cent on imports from China, Taylor points out that the share of Chinese exports to the US during Trump’s last term in office fell from 21 per cent in 2016 to just 14 per cent in 2023. ‘The impact of tariff increases will not be clearly measurable, and their impact on China and other emerging markets will be different from that during Trump’s first term,’ says the expert, who was CIO APAC at DWS before joining Matthews.

Opportunities for investors in emerging markets under ‘Trump 2.0’ …

Taylor lists specific investment opportunities in Trump’s second term in office:

• Companies from emerging markets with production in the US
• India and its growth story over the next ten to 20 years
• South Korea and Taiwan because of their importance as semiconductor centres in the AI supply chain, which also supply US technology companies
• Taiwan, if Trump decides to act as a mediator in the conflict between China and Taiwan
• Renewable energy and the global drive towards sustainability, which could create investment opportunities in emerging markets.

… and risks of his second term

In Taylor’s opinion, however, the biggest challenges under Trump 2.0 include:

• Tougher US trade policy, including tariffs, against foreign companies that export to the US but do not produce there
• A tariff war between the US and Europe which will increase pressure on car exporting nations such as South Korea
• Taiwan’s stance and impact on geopolitics as tensions rise between China and the US over the island nation’s independence
• Stronger USD and higher interest rates in the longer term as an obstacle to growth in the ASEAN countries, Taiwan, South Korea, Brazil and Mexico, which are highly dependent on global trade.

‘Given the uncertainties surrounding Trump’s second term, we believe a cautious but opportunistic investment approach is advisable, focussing on markets with solid domestic fundamentals and high-growth sectors,’ says Sean Taylor. You can find his latest commentary here: ‘Emerging Markets in Focus: Opportunities & Challenges of Trump 2.0 for Investors“.