In every trade war, there are winners and losers. While the US and China might be losing as ever-escalating tensions push tariffs higher, there are other countries in Asia that could be winners.
As it stands, many US companies manufacture products in China or use products from China in their global supply chains. But to avoid tariffs on Chinese products, companies could shift manufacturing to other Asian countries, Rashmi Gupta, a money manager at JPMorgan Chase Bank, told Markets Insider in an interview.
In a June report, a group of economists at Nomura ranked which countries would benefit most from the US and China diverting imports away from each other and into other countries. This could be positive and “benefit some industries in those economies,” they wrote.
The products that are being diverted most are electronics, followed by furniture and travel goods, Nomura said.
Moving imports from China has already been floated as an option by President Donald Trump. On Friday, he demanded in a tweet that American companies “immediately start looking for an alternative” to doing business with China.
In the same tweet, Trump said he would increase tariffs on $250 billion worth of imports to 30% from 25% starting October 1. He also said that the final $300 billion worth of imports set for tariffs on September 1 would be taxed at 15% instead of 10%. The escalation came after China announced retaliatory tariffs on $75 billion worth of US imports.
To be sure, ancillary emerging-market countries have already been hit hard by the trade war this year. The MSCI EM Index is flat in 2019 so far, while the S&P 500 has climbed more than 14%. And that underperformance stretches back years.
But Gupta said there were still ample pockets of opportunity within emerging markets.
“We talk about emerging markets as one block, one asset class, but you have to remember there are many different countries,” she said.
Those countries have different policies and drivers of growth to consider, which can make emerging markets a rich ground for generating returns, Gupta said.
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