“There is a longer term story here for emerging markets, because economies beyond China stand to benefit from ongoing supply chain reconfiguration,” says Rajanayagam. “And this was something that was already happening even prior to COVID, but could certainly be accelerated in the wake of the pandemic.
“[Additionally] the longer these US-China tariffs remain in place, the more likely it is that US businesses will look to alternative suppliers to circumvent these duties. And indeed, China has already lost some import market share in the US to other emerging Asian countries and to Mexico as well.”
Corporates do face risks in emerging markets, including tariffs and red tape, but many countries are taking steps to advance trade liberalisation and sign new trade deals, such as the Regional Comprehensive Economic Partnership deal in the Asia Pacific region, which is due to take effect next year and the African Continental Free Trade Area, which brings together about 54 African countries.
“Corporate clients are diversifying their supply chains, primarily from Asia. With high transportation and shipping costs, it doesn’t make sense for certain clients to import from Asia. Turkey, for example, is becoming an increasingly popular region for European retailers,” says Artar.