An index of developing-world currencies reversed losses minutes after Trump announced a 90-day pause in tariffs he recently imposed on most US trading partners. The reversal — which excluded China — also had the $73 billion Vanguard FTSE Emerging Markets ETF clocking its best day since 2022. A gauge of credit default swaps that protect against emerging-market sovereign default tightened more than 30 basis points in less than one hour.
Latin America, which is seen as relatively more insulated from Trump’s tariffs, paced the bounce in currencies — the Mexican peso and Brazilian real both gained more than 3% each.
Some strategists see room for additional gains, saying the region is well positioned to benefit as talks continue. Others, like Phoenix Kalen, head of emerging markets research at Societe Generale in London, favor relative-value trades in rates markets.
“EM assets will certainly benefit from this risk rally, and the reinforced perception that Trump is continuing to bluff on the tariff war,” she said.
Here’s what strategists and investors have said about what’s next for risk assets:
- Alvaro Vivanco, currency strategist at TJX Partners
- “No other way to read this than as Trump capitulating, giving the market a break and focusing on China”
- “The next step is a longer-term break for Canada and Mexico to add pressure to China”
- “The trade here I think is to go short USDMXN towards 19.50”
- Brad Bechtel, head of foreign exchange at Jefferies
- “It’s just a broad based relief rally, and short squeeze. A lot still depends China’s reaction, and volatility will remain high”
- “I’d own TRY in this environment”
- Paresh Upadhyaya, director of fixed income and currency strategy at Victory Pioneer
- “The market will begin to price in the universal tariff that is here to stay. Trump can say he’s accomplished what he laid out to do which is forcing nations to negotiate on trade. To that end, he’s been incredibly successful”
- “Countries that retaliated could be losers, especially if these negotiations involve monitoring re-routing of exports”
- Greg Lesko, a portfolio manager at Deltec Asset Management LLC focused on emerging-market stocks
- “Risk appetite has turned on a dime as Trump pauses tariff hikes on most countries, giving them time to negotiate complex trade arrangements”
- “LatAm had been spared the brunt of the tariffs and commodities are rebounding so may be a place to look at”
- Phoenix Kalen, head of EM research at Societe Generale in London
- “Several of the frontier markets offer some insulation from tariff wars”
- “Relative-value trades can make sense, such as ratesmsteepeners on Latin American curves, or selective front-end rates receivers in an environment of collapsing growth expectations”
- Luis Estrada, a strategist at RBC Capital Markets in Toronto
- “Trump is pushing the market smartly. When he saw strength, then he squeezes shorts with an extra commentary. He is not stopping the fall, he is pushing the upswing from behind”
- “In uncertain times, we watch Treasury auctions very closely because they can’t lie. It’s a true test to appetite for an asset”
- Juan Perez, a foreign-exchange trader at Monex
- “It is awfully difficult to have much clue as to what comes next and when since this all seems kind of arbitrary and not a guarantee of putting aside a trade war”
- “Just what exactly will be accomplished here with decoupling from China is what all across market classes are asking themselves. EM and Latam have a lot to gain since there is precedent of working out disputes”
- Brendan McKenna, a currency strategist at Wells Fargo in New York
- “Whether tariffs on China are 50%, 104% or 125%, I don’t think it matters at this point. Markets are more focused on the reciprocal tariffs”
