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Emerging Market Economies Shaken by Trump Victory

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The fear of Donald Trump’s presidency sent the currencies of Mexico and Brazil down by roughly 10 percent in the aftermath of his election victory. The Mexican Peso dropped by 12 percent after the announcement, but has since made a modest attempt at a comeback. The Brazilian Real was down by 9 percent, as fears of the coming president’s protectionist policies became amplified. America’s North American neighbours and its South American trade partner aren’t the only countries worried about being trumped. Emerging economies in general are concerned that a change in the U.S’s trade agreements will affect exporters to the world’s largest economy. The Mexican Central Bank responded by increasing the interest rate, with more to come in the next few months. Donald Trump will be sworn in as president in January 2017.

Mr Trump said in his campaigns that he will revamp the North American Free Trade Agreement (NAFTA), a deal which involves Mexico and Canada. Donald Trump has pledged to create more jobs in the US, which would necessitate limiting imports. China and Mexico will be the biggest losers in this equation. Of greater concern to a larger number of countries is the strengthening of the dollar. Countries with high debts in dollars will struggle to pay them off if it gets stronger. However, Trump has promised to develop the country’s infrastructure, and the cheapest way to do this is by importing lower-priced goods. While uncertainty remains as to which changes he will be able to enforce, it is clear that trade with at least some of the country’s partners will be affected.

 

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