Street Signals
The Other Side in the Trade War
Feb 27, 2025
Ning Sun, a Senior Emerging Market Strategist at State Street Global Markets, delves into the often-ignored impacts of trade wars on developing economies. He discusses how U.S. tariffs could reshape Mexico's economy and the fears of foreign direct investment decline. The conversation includes the potential dangers for U.S. companies in Mexico and the semiconductor sector's vulnerability. Sun also highlights the geopolitical repercussions for Asian economies and the shifting dynamics in global partnerships, emphasizing the need for strategic foresight.
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Quick takeaways
- Despite significant media coverage, the actual impact of trade tariffs on US markets remains minimal, showing disconnect from sensational narratives.
- Emerging economies, particularly Mexico, face severe repercussions from potential tariff increases, risking foreign investment and economic stability amid geopolitical tensions.
Deep dives
The Ineffectiveness of Trade War Narratives
Current narratives around tariffs and trade wars are receiving substantial media attention, yet their actual impact on market dynamics appears minimal. Despite the headlines, data suggest that fluctuations in trade war coverage do not correlate significantly with changes in the US dollar or equity markets. Moreover, traditional measures of risk premia indicate low levels of volatility, suggesting that the markets are largely unfazed by the ongoing discussions surrounding tariffs. This situation reveals a potential disconnect between sensational media coverage and the actual underlying influences on market behavior.
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