Many emerging markets portfolio managers view the current situation as highly fluid, with significant uncertainty surrounding the outcome. Investors are closely monitoring for any potential bilateral negotiations between the Trump administration and the countries affected by the tariffs. Several options remain on the table, including direct retaliation or the implementation of fiscal stimulus measures to support exporters.
Even before the latest announcement, the risks associated with tariffs on China had been on investors’ radar for some time, leading several active managers to adjust their portfolios away from export-dependent sectors toward sectors more reliant on domestic demand, such as internet services, household goods, and services. These sectors are considered less vulnerable to tariffs.
How Top-Rated Fund Managers Are Reacting to Emerging Market Turmoil
For instance, the Gold-rated GQG Partners Emerging Markets Equity fund, managed by Rajiv Jain, anticipates a slowdown in economic growth due to the impact of Trump’s new tariffs and trade policies. As a result, Jain has reduced exposure to high-growth stocks with relatively high valuations and is opting for companies with more defensive growth profiles and greater earnings certainty. While still focused on growth, Jain’s strategy emphasizes defensive growth. He believes China will be significantly affected by US tariffs, which will affect trade dynamics, fiscal deficits, and overall economic growth. Consequently, the fund maintains a significant underweighting in China (11.5% versus 30% in the Morningstar Emerging Markets Target Market Exposure Index).
Meanwhile, at Silver-rated Polar Capital Emerging Markets Stars, manager Jorry Nøddekær maintains an underweight position in China (26% versus 30%) and is highly selective with his exposure. He sees growth opportunities in specific sectors, particularly in China’s role in the emerging multipolar world as a producer of consumer and capital goods. The fund also holds an overweight position in Latin America, as Nøddekær believes the region will experience minimal impact from Trump’s tariff policies.
The Silver-rated JPM Emerging Markets team believes that now is not the time for hasty decisions, but it will reassess its portfolio if tariffs have a significant impact. The portfolio management team expects inflation in the US, mainly due to domestic companies being given the opportunity to match import prices. In the team’s view, this could lead to higher inflation, slower growth, and potentially higher interest rates. It continues to focus on companies with durable competitive advantages, consistent cash flow, and strong management—a strategy it is confident is well-suited to current market conditions.
Nick Price at the Silver-rated Fidelity Emerging Markets Equity fund has concentrated the China exposure in consumer-facing sectors (sportswear, internet, and white goods), positioning the portfolio to benefit from potential further stimulus measures. The fund has adopted modest exposure to exporters, with an active underweighting in the manufacturing sector (automotive), where companies are more exposed to increased tariffs. Additionally, the fund is overweight in Latin America, focusing on domestic businesses and consumer companies in Mexico, as well as domestic banks and financial technology in Brazil—sectors that are largely insulated from tariff impacts.
This is an edited version of a Morningstar research report, US Tariffs: Implications for Emerging Markets. Lena Tsymbaluk is associate director, manager research.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
