23 Mar 2018 2 min read

EM exports and US protectionism – the trade-off

By Uday Patnaik

The revised Trans-Pacific Partnership (TPP) agreement was finally signed in March - over a year after President Trump removed the United States as a signatory. We take a quick look at how much emerging markets depend on the US as a trading partner.


Eleven countries have signed the CPTPP agreement: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The agreement is an example of the type of cross-regional integration that should help reduce the risk of geopolitical uncertainty and conflict.

It would not only be a shame but also an initial economic blow for individual emerging market (EM) countries if the US became more introverted from its already low export/GDP ratio of 8% compared to, for example, Germany’s 40%.

Even though EM countries overall are increasingly diversifying their trading partners, they will be disappointed to see a more introverted US trade policy.

But, the reality is that the world has changed in the past few decades, with EM countries as a group now sending almost 60% of their total exports to fellow EM countries (see the chart below).

Indeed, while the US still consumes a sizeable 16% of EM exports, that is a far cry from the post-1995 peak of 25%. Much of that has been taken up by China, which now consumes around 12% of EM exports and will likely continue to increase its share as it grows at a faster rate than most countries.

Even though EM countries overall are increasingly diversifying themselves away from depending on single trading partners, they will be disappointed to see a more introverted US trade policy. In my next post on the subject, I will be examining the individual countries, such as Mexico, which would have the most to lose.

Uday Patnaik

Head of Emerging Markets Debt

Uday is responsible for developing LGIM’s emerging market capabilities within the Active Fixed Income team. Uday joined LGIM in April 2014 from Gulf International Bank (UK) Ltd where he held the title of Chief Investment Officer with primary responsibility for managing the flagship EMD hedge fund and other fixed income portfolios. Prior to that, Uday set up the Bear Stearns’ Eastern European sovereign trading desk in London, and at Merrill Lynch in New York helped manage the firm’s Latin America exposure and build the institutional customer base. Uday has an MBA in finance from the University of Chicago and a BSc degree in industrial management from Carnegie Mellon University.

Uday Patnaik