Initial fears concerning the impact of American trade policy on emerging markets (EM) were considerable, but now that the dust has dropped, it seems that EMs are perfectly positioned to prosper in this new reality, despite a new higher tariff landscape.
The time when Asia was only the industrial subcontractor of the West, France The bastion of luxury and tourism, and the United States the engine of the technological revolution is over. Not so long ago, investors had only to invest in the United States to obtain solid performance. The emerging markets were not even taken into account because they were synonymous with underperforming markets, political risks and self-destructive leaders.
But this is no longer the case today. Donald Trump’s re -election sounded the awakening of investors around the world and restores its letters of nobility to emerging markets.
The Trump effect
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Donald Trump’s second term did not only start on the wheel hats, he has turned half a century of global standards. The risk-free rate, for a long time the prerogative and luxury of the United States, is no longer. Political risk is now an American phenomenon, while the institutions have been questioned and, in doing so, weakened.
In short, the United States now behaves as an emerging market. Normally, in a market drives at risk like that of today, risk -free assets – US treasury bills and the US dollar – are the most efficient asset and currency respectively. We are witnessing the opposite: the yields of treasury bills are increasing, the American stock markets collapse and the dollar is weakening (it dropped compared to all the currencies of the emerging markets in 2025). Investors sell the United States.
As a result, investors are starting to consider investing more outside the United States, especially in emerging markets. Donald Trump’s attitude has certainly been a trigger, but there is a more important force: this evolution also coincides with the arrival of China.
DOLLAR AMERICAIN VS. DEVISES EMERGENTES (INDICE JP MORGAN EM FX)
Sources : Bloomberg, 19/06/2025
American yield vs. Emerging local debt
Sources : Bloomberg, 19/06/2025
China Evolution
Sen more years ago, China was often mentioned for the rapid growth of its economy and the power of its manufacturing sector, but the quality of its products was often criticized, being much lower than that of American or German products. Today, this disparity has disappeared.
The country houses some of the best scientists and engineers of the new generation, trained by its excellent education system, and has considerably strengthened its industrial capacities and skills. China is no longer simply the sneaker and denim manufacturing center, which it now subcontracts in Cambodia and Vietnam. Today it is a world leader in the fields of renewable energies, electric vehicles (VE) and artificial intelligence (AI). Taking advantage of new technologies, China dominates the global manufacturing industry.
It is interesting to note that the global chain for the manufacture of renewable energies is dominated by China, which means that the more the adoption of these energies will be important in the West, the more China will benefit. In addition, China is now the world’s leading exporter of cars, with Byd selling more vehicles in Europe than Tesla. Chinese domination in the automotive sector threatens the very existence of the German automotive industry, the German manufacturers accusing a significant delay in terms of autonomy and recharge speed of the batteries of electric vehicles.
China: the big leap in front of AI
Two years ago, Nvidia went from a relatively discreet company specializing in semiconductor equipment to the most valued company in the world, with the emergence of AI. It was assumed that the United States would naturally dominate the AI domain, just as Microsoft and Google had previously reigned in the technological sector, and Openai seemed ready to follow their traces.
Two years later, Deepseek upset this hypothesis, now positioning himself as a serious competitor in the AI race.
Second world economy, China has an exceptional education system focused on science and mathematics, as well as a government that invests massively. American measures aimed at limiting exports of electronic fleas to China in order to slow down the development of its AI have failed. Jensen Huang, CEO of NVIDIA, recently warned that Chinese companies specializing in AI were now “formidable” and quickly developed their own semiconductor manufacturing sites. China has been underestimated, and it is naive to think that it cannot be self-sufficient in this area.
The world now realizes that China is no longer just a low -cost manufacturing center; It is now much more sophisticated and can dominate global manufacturing in almost all areas, including biotechnologies, health care and petrochemicals. In almost all sectors, China is incredibly well positioned thanks to long -term supported human and financial investments. In addition, it is the first trading partner of almost all emerging markets.
Our exposure to China is mainly concentrated on technologies and consumption; It is a country where consumption represents the lowest share of GDP among the largest countries in the world. A rebalancing is necessary.
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