Forecast: currencies of developing countries will fall by 5%

Experts in the field of investment strategies express concerns about the underestimated risks associated with the protectionist policies that the Donald Trump administration may pursue. They predict a significant 5% drop in the currencies of developing countries in the first half of 2025, as well as a sell-off of sovereign debt.

Special attention is drawn to the Chinese yuan, which, according to experts, is vulnerable to negative consequences in the event of the introduction of new duties. In particular, if the US administration imposes duties of 40%, the yuan may fall to 7.6 per dollar. An increase in this duty to 60% will lead to an even more significant drop in the yuan, to 8 per dollar, compared with the current exchange rate of about 7.24.

Analysts also note that the weakening of the yuan will have a negative impact on other emerging market assets. In addition, lower oil prices can create pressure on high-yield sovereign debt, increasing the difference in yields by as much as 100 basis points. In their opinion, the introduction of new tariffs may occur in conditions of already weakened economic activity, which will make the situation even more difficult than during the 2018 trade war.