The latest news surrounding the escalating trade tensions between the United States and China is not only affecting the markets of these economic superpowers, but another negative byproduct is that emerging markets are also feeling the aftereffects of the tariff battles.
This is evident with the MSCI Emerging Markets Index down 1.00% today as more news regarding tariff wars between the U.S. and China continue to dominate the news. Trade tensions between the U.S. and China ensued last Friday after U.S. President Donald Trump introduced a 25 percent tariff on $50 billion of Chinese goods with China countering with a 25 percent tariff on $34 billion of U.S. goods.
Related: Trade Wars Drag Dow Down 200 Points at Open
One ETF not taking too kindly to the ensuing trade wars is the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO)–down 1.60% today and 2.65% year-to-date. VWO could be getting short interest from traders, especially if the U.S.-China trade tensions play out longer than expected.
Other emerging markets ETFs were hit as well with iShares MSCI Emerging Markets ETF (NYSEArca: EEM) down 1.53% today and 3.03% year-to-date. The Schwab Emerging Markets Equity ETF (NYSEArca: SCHE) is down 1.51% today and 3.15% year-to-date.
IMF Director Weighs In
Emerging markets ETFs could continue to feel the negative pangs of negative market reactions to the trade wars if other global superpowers decide to join the fray.
Related: Buying the Dip in Emerging Markets Bond ETFs
“Let us not understate the macroeconomic impact (of the trade conflicts),” said Christine Lagarde, the managing director of the International Monetary Fund. “It would be serious, not only if the United States took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe and Germany.”
For more global trends in emerging markets ETFs, click here.