Citi Discusses Emerging Markets and US Tariff Impacts

Citi Discusses Emerging Markets and US Tariff Impacts

The analyst comments "We update our analysis of the macro impact from recent US tariffs, subject to model limitations, e.g. can only make tariff adjustments for 13 US trading partners (including China’s retaliation) and not factoring in policy uncertainties. We estimate the 2025E-26E growth shock is disproportionately large for Vietnam, 3x that of US or China (both in the 1.8ppts) range. Thailand, Korea, Taiwan, Malaysia, Singapore are also significantly hit by 1.7-2.4ppts, while Czech and Hungary lead EM Europe with 1.4-1.5ppts growth hit. We forecast an asymmetric inflationary impact, with US estimated to face a 0.9ppts inflation vs. disinflation for EM averaging -1.3ppts. Vietnam-US negotiations for potential tariff relief will be key bellwether – lack of reprieve for Vietnam would deliver a warning message on the Trump administration’s intent to persist with tariffs even with no strategic US jobs reshoring gains, likely necessitating more aggressive (monetary) policy easing and weaker Asia FX."

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