Why Trump Administration Won't Affect Emerging Market ETFs

As investors scramble to prognosticate President Donald Trump’s effect on equities, more investors are taking a second look at emerging market exchange traded funds.

ETF Trends publisher Tom Lydon spoke with Ed Kerschner, Chief Portfolio Strategist at Columbia Threadneedle, at the Inside ETFs conference that ran Jan. 22-25, 2017 to talk the renewed focus on the emerging markets.

“A lot of our focus is on the emerging markets, and there’s a fear out there that Trump is going to put us in trade wars and that’s the end of the emerging markets,” Kerschner said.

Many view developing countries as export-oriented economies that heavily rely on trade with larger economies, like the U.S. With Trump’s more protectionist rhetoric and an “America first” mantra, observers have warned that emerging markets could suffer if trade is stifled.

However, many are overlooking the fact that the U.S. also relies on exports to its partners in the developing economies as well.

“But if you look at the numbers, people are shocked; only sixteen percent of emerging market exports actually go to the United States,” Kerschner said. “Forty percent of emergings export with each other…. Forty-six percent of U.S. exports go to the emerging markets.”

Consequently, starting a trade war with emerging markets may do more harm than good.