Emerging Markets Economics_ EM Under “America First Trade Policy”_ What’s Next, Who’s Exposed_

Summary of Key Points from the Conference Call Industry and Company Overview - Industry: Emerging Markets Economics - Focus: Impact of the "America First Trade Policy" under the Trump administration on various sectors including semiconductors, pharmaceuticals, and steel & aluminum Core Insights and Arguments 1. Policy Initiatives: The Trump administration's second term has seen a surge in policy initiatives that are more ambitious and less targeted than before, indicating a shift in US economic and foreign policy [2][10][28] 2. Foreign Policy Stance: The administration is adopting a bolder and more confrontational foreign policy, affecting traditional allies and increasing scrutiny on countries like Ukraine, which is vulnerable to US foreign aid freezes [2][11][17] 3. China's Negotiation Stance: Chinese authorities are showing a willingness to negotiate, with market reactions to US tariffs being relatively muted. The tariffs imposed are less targeted, affecting a broader range of imports [2][22][26] 4. Sector-Specific Tariff Risks: - Semiconductors: Countries like Malaysia, Taiwan, and Costa Rica are most exposed to potential tariffs. The focus may shift towards high-end chip fabrication in Taiwan and Korea rather than lower-value assembly in Malaysia [3][33] - Pharmaceuticals: A blanket tariff would primarily impact Europe, with Singapore and Hungary being particularly vulnerable among emerging markets [3][38][41] - Steel & Aluminum: Mexico, Brazil, UAE, and South Africa are identified as more exposed, although the overall impact is expected to be modest [3][42][43] Additional Important Insights 1. Trade Deficits: The US trade deficit has increased significantly since 2017, with China and the EU likely to face the most scrutiny in the upcoming America First Trade Policy review [4][48][50] 2. Currency Manipulation: The review of currency manipulation is unlikely to lead to significant tariff actions, but it highlights US sensitivity to currency depreciation among surplus countries, particularly in East Asia [6][53] 3. Emerging Market Vulnerabilities: Countries in East Asia and the EU are seen as most vulnerable to the impacts of the America First Trade Policy, with potential adverse effects on growth in trade-dependent economies [4][60][62] 4. Central Bank Policies: Emerging market central banks are expected to focus more on demand-driven growth shocks rather than inflation risks, maintaining an easing bias in monetary policy [4][63] Conclusion The evolving landscape of US trade policy under the Trump administration presents both risks and opportunities for emerging markets, particularly in sectors like semiconductors and pharmaceuticals. The focus on tariffs and trade deficits will likely shape economic interactions and growth trajectories in the coming months.