All the signs suggest that a second Trump administration would take a more protectionist approach to trade. Export demand in Mexico, East Asia and ASEAN would be particularly hard hit by a universal US import tariff or a dollar devaluation, and those measures would in all likelihood lead to a gumming up of the friendshoring process. By contrast, a punitive US tariff specifically on China could boost inward FDI into US-aligned EMs, both through friendshoring and through Chinese firms seeking to minimise the impact of trade barriers by locating more production outside of the country. But maybe the clearest implication of another Trump presidency and higher trade barriers would be a rebound in US inflation and higher US Treasury yields, which would weigh on EM financial markets.
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