Global Themes /
China

Trade wars and the EM impact – Part 2: Identifying the winners and losers

    Christopher Dielmann CFA
    Christopher Dielmann CFA

    Director, Macroeconomic & Sovereign Research

    Stuart Culverhouse
    Stuart Culverhouse

    Head of Sovereign & Fixed Income Research

    Tellimer Research
    10 July 2019
    Published by

    At the recent G20 Summit, the US and China agreed to hold off on any additional tariff levies for the time being and to continue negotiations. However, our view is that uncertainty regarding future tariffs and the trading environment will continue to be a major thematic issue for medium-term investment.

    In Part 2 of our examination of the impact that the US-China trade war could have on third-party EMs, we turn our attention to the more quantitative aspects. Part 1, published on 26 June, looked at the geopolitical context, trade theory and the main channels through which bilateral trade tensions in the two biggest countries in the world could impact third-party countries. 

    After analysing the key exports of 43 markets (EMs and FMs) and other channels that might impact them beyond trade-displacement effects, we put countries into four groups: those that might experience a positive impact; those that might see a negative impact; those that might see mixed results; and those that will be relatively unaffected – the neutral set. 

    We believe that Vietnam, the most open economy in our sample, is likely to be one of the largest beneficiaries, or "winners", from the global tensions, along with India, the Philippines, Thailand and Turkey. Additionally, we find that, typically, closed economies and economies that are dependent on single commodity exports are likely to perform worst.

    We also provide a detailed trade table for all 43 markets, showing their main export industries and how they could be impacted by tariffs. 

    Our results identify 26 products in 25 countries with substitution opportunity in the US, and 30 products in 30 countries with substitution opportunity in China.