US trade protectionism is bad for Emerging Markets
Authors
Insight
PDF 349.4KB 21 September 2016
Key points
- Trade-unfriendly policies expressed by the two leading US presidential candidates in the run-up to elections create uncertainty for EM exporters.
- Donald Trump blames trade deals for the closing of US factories and the loss of jobs, while Hillary Clinton has tried to soften her past support for trade deals.
- Mexico and China top the league as the most vulnerable to any new anti-trade bias because of large bilateral trade surpluses they run against the US.
- Financial and trade centres, like Singapore and Hong Kong, are also highly exposed, because of investment ties with the US.
- We find that the sensitivity of real GDP growth to a hike in tariffs is more pronounced for Asia followed by Latin America, while it is not significant for Central Eastern Europe.
- We consider three scenarios: in the worst scenario, trade protectionism in the US triggers a drop in global trade volumes and protracted recession similar to that experienced after the adoption of the Smoot-Hawley Act in the ‘30s in the US.
- Under the very bad scenario a regional trade war erupts with US trade policy targeting Mexico and China.
- In the baseline scenario, status quo is maintained, acknowledging as the bilateral US trade deficits are not as wide once correctly measured, while trade has contributed significantly to the US job creation.
US macro policies matter for the world
With China fears subsiding and Brexit set in stone, the US presidential election has become a top risk for global financial markets in the near-to-medium term. Significant policy divergence from the status quo will inevitably affect the trajectory of the US economy in the coming years. But as the world’s largest economy, with a currency that dominates global capital flows, these changes will also likely have a significant spill-over effect onto the world...
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In the United Kingdom, this document is intended for Professional Clients only, as defined by local laws and regulation, and is issued by AXA Investment Managers UK Ltd, which is authorised and regulated by the Financial Conduct Authority.
© AXA Investment Managers 2016. All rights reserved
This document is for informational purposes only and does not constitute, on AXA Investment Managers part, an offer to buy or sell, solicitation or investment advice. It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.
All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document.
Furthermore, due to the subjective nature of these analysis and opinions, these data, projections, forecasts, anticipations, hypothesis and/or opinions are not necessary used or followed by AXA IM’s management teams or its affiliates, who may act based on their own opinions and as independent departments within the Company.
By accepting this information, the recipient of this document agrees that it will use the information only to evaluate its potential interest in the strategies described herein and for no other purpose and will not divulge any such information to any other party. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.
This document has been edited by : AXA INVESTMENT MANAGERS SA, a company incorporated under the laws of France, having its registered office located at Tour Majunga, La Défense 9, 6 place de la Pyramide, 92800 Puteaux, registered with the Nanterre Trade and Companies Register under number 393 051 826.
In Australia, this document is issued by AXA Investment Managers Asia (Singapore) Ltd (ARBN 115203622), which is exempt from the requirement to hold an Australian Financial Services License and is regulated by the Monetary Authority of Singapore under Singaporean laws, which differ from Australian laws. AXA IM offers financial services in Australia only to residents who are “wholesale clients" within the meaning of Corporations Act 2001 (Cth).
In Belgium, this document is intended exclusively for Professional Clients only, as defined by local laws and the MIFID directive, and is distributed by AXA IM Benelux, 36/3 boulevard du Souverain – 1170 Brussels Belgium, which is authorised and regulated by the FINANCIAL SERVICES AND MARKETS AUTHORITY.
In Germany, This document is intended for Professional Clients as defined in Directive 2004/39/EC (MiFID) and implemented into local law and regulation only.
In Hong Kong, this document is issued by AXA Investment Managers Asia Limited (SFC License No. AAP809), which is authorized and regulated by Securities and Futures Commission. This document is to be used only by persons defined as “professional investor” under Part 1 of Schedule 1 to the Securities and Futures Ordinance (SFO) and other regulations, rules, guidelines or circulars which reference “professional investor” as defined under Part 1 of Schedule 1 to the SFO. This document must not be relied upon by retail investors. Circulation must be restricted accordingly.
In the Netherlands, this document is intended exclusively for Professional Clients only, as defined by local laws and the MIFID directive, and is distributed by AXA IM Benelux- Netherlands Branch, Atrium - Tower A, 14th Floor Strawinskylaan 2701 1077ZZ Amsterdam - the Netherlands, which is authorised and regulated by the FINANCIAL SERVICES AND MARKETS AUTHORITY.
In Singapore, this document is issued by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W). This document is for use only by Institutional Investors as defined in Section 4A of the Securities and Futures Act (Cap. 289) and must not be relied upon by retail clients or investors. Circulation must be restricted accordingly.
In Spain and Portugal, this document is distributed by AXA Investment Managers GS Limited, Spanish Branch, has its registered office in Madrid, Paseo de la Castellana no. 93, 6th floor, is registered in the Madrid Mercantile Register, sheet M-301801, and is registered with the CNMV under 19 number as ESI of the European Economic Space, with Branch.
In Switzerland, this document is intended exclusively for Qualified Investors according to Swiss law. Circulation must be restricted accordingly.
This document has been issued by AXA Investment Managers LLC, Qatar Financial Centre, Office 603, 6th Floor, QFC Tower, Diplomatic Area, West Bay, PO Box 22415, Doha, Qatar. AXA Investment Managers LLC is authorised by the Qatar Financial Centre Regulatory Authority.
In the United Kingdom, this document is intended for Professional Clients only, as defined by local laws and regulation, and is issued by AXA Investment Managers UK Ltd, which is authorised and regulated by the Financial Conduct Authority.
© AXA Investment Managers 2016. All rights reserved