Global trade has become the focus of attention in recent weeks with President Trump’s proposed plan to implement 20% tariffs on good imported into the US from Mexico. Emerging countries depend on exports to developed countries since developed countries are major consumers of goods produced cheaply in emerging countries. Countries such as China are major exporters of goods to the US.
So with trade wars looming in the horizon, which emerging countries are most exposed to the US market?
Contrary to popular belief many emerging countries have limited exposure to the US. So American trade wars alone cannot submerge emerging market economic growth.
According to a report by Schroder’s China may not affected too much due to US actions since China’s exports to the US account for only 4% of its GDP. However Mexico will be highly affected by US tariffs as the country’s exports to the US amount to nearly 30% of its GDP. While China’s trade is more diversified especially with many Asian partners, US’ southern neighbor Mexico is strongly connected to the American economy.
The chart below shows the emerging countries most exposed to the US:
Click to enlarge
CNY – China
INR – India
MXN – Mexico
CLP – Colombia
RUB – Russia
Source: Schroders Economic and Strategy Viewpoint, Feb 2017
The report also notes that Brazil, Colombia and India are also less dependent on the US market.