Trump and the Republican party have swept the US’ political landscape, opening up a wide range of large policy changes that could shock the emerging market (EM) economic and geopolitical outlook. 

We do not know the exact policy mix that Trump will follow the second time round. But one common feature across plausible policy constellations is more inflationary pressure and a higher-than-otherwise federal funds rate, reducing the magnitude of EM central bank rate cuts. 

A ‘market friendly’ Trump presidency may be noisy, but ultimately would be good for many EMs: the Fed may cut by less, but a stronger global economy and ‘risk on’ market sentiment would mitigate the impact of USD pressure. 

By contrast, a far-reaching trade war would be much harder to navigate, creating a wide range of winners and losers across EMs. This is a particular risk for China, but could ultimately benefit countries that are able to capture the reshoring of manufacturing.

A tougher US stance on migration and deportations would be felt most in Latin America, complicating the 2026 USMCA review. But, ultimately, the more the US decouples from China, the more it will need Mexico.

A wider range of foreign policy aims and outcomes is also possible under a second Trump presidency. Resolutions to the Ukraine-Russia and Middle East conflicts remain unlikely in the near term, but a more isolationist and transactional approach could recast relations with both friends and foes.

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