Emerging markets: Navigating today’s complicated trade map
Assessing a more fragmented global trade environment, where shifting flows are creating uneven outcomes across the asset class.
Duration: 3 Mins
Date: Jul 21, 2026
The narrative of de-globalization often leans toward disruption: rising tariffs, fractured alliances, and a retreat from decades of trade integration. Yet for emerging markets (EMs), the reality is more nuanced. Rather than a clean break from globalization, what is unfolding is a reconfiguration of trade relationships – one that creates both friction and opportunity.
Recent discussions highlight an important duality. On one hand, tariffs and geopolitical tensions introduce uncertainty, particularly for export-driven economies. On the other, they also encourage diversification, as companies and countries alike seek alternative partners and suppliers.
This shift underscores a key point: globalization is not ending, it is evolving (Chart 1).
Chart 1. Emerging market outperformance (2025 returns vs. Developed markets)
Margin pressure meets pricing power
One of the clearest transmission channels of de-globalization is margin pressure. Rising input costs, including higher energy prices, are already weighing on exporters (Chart 2), tightening profitability across sectors.
Chart 2. Asia reliance on Gulf energy
However, the impact is not evenly distributed.
Higher-quality businesses – particularly those with differentiated products or strategic importance – have demonstrated an ability to offset these pressures. Companies with strong pricing power, such as semiconductor manufacturers, have managed to pass on increased costs, in some cases raising prices multiple times across product lines.
By contrast, more commoditized industries face a different reality. In sectors like textiles, where substitution is easier and competition is more intense, the burden of tariffs and cost increases is more likely to be shared across the value chain.
Why it matters
The divergence highlights a broader theme: in a fragmented trade environment, resilience is increasingly tied to differentiation.
The limits of reshoring
Policy rhetoric in developed markets has emphasized reshoring – the return of manufacturing to domestic economies. Yet in practice, structural constraints limit how far and how fast this shift can go. Cost dynamics remain a critical barrier. Labor-intensive industries, such as apparel manufacturing, are unlikely to relocate meaningfully to higher-cost regions, simply because the economics do not support it.
Even where strategic priorities are stronger – for example, in technology or artificial intelligence – the transition is neither quick nor straightforward. Established production hubs, particularly in Asia, benefit from deep ecosystems, skilled labor pools, and specialized infrastructure that are difficult to replicate. Any attempt to rebuild these capabilities elsewhere is expected to unfold over years, not quarters.
Why it matters
In this context, reshoring appears less like a wholesale reversal of globalization and more like a selective, long-term adjustment.
Supply chain diversification
Risk or opportunity?
Perhaps the most defining feature of today’s trade environment is the search for alternatives. As companies reduce reliance on single-country supply chains – particularly China – new beneficiaries are emerging.1 Countries such as India and South Korea are already seeing increased demand as firms look to diversify production and sourcing.2
This dynamic is not limited to low-cost manufacturing. It extends into more complex and strategic sectors, including shipbuilding and advanced manufacturing, where geopolitical considerations are reshaping procurement decisions. In some cases, partnerships are deepening alongside diversification, reinforcing ties between allied economies while redirecting trade flows away from others.
Why it matters
For EMs, we believe this may create a powerful but uneven tailwind – one shaped by sector positioning, infrastructure readiness, and geopolitical alignment.
The consumer trade-off
Tariffs are often framed as tools for protecting domestic industries. Yet their downstream effects are harder to ignore. In many cases, tariffs ultimately translate into higher costs for end consumers, either directly through price increases or indirectly through reduced efficiency.
This raises a fundamental tension at the heart of de-globalization: while governments may prioritize resilience and strategic autonomy, markets remain sensitive to cost and efficiency. The result is a push-and-pull dynamic, where economic and political objectives do not always align.
Why it matters
For EM exporters, this tension can be both a challenge and an opportunity – depending on where they sit in the value chain.
Growth headwinds, but not a collapse
Despite widespread concerns, the macroeconomic impact of tariffs and trade fragmentation has so far been more muted than many anticipated. Growth and inflation have not experienced the sharp disruptions that were once feared.
That said, the directional effect remains clear. Trade barriers and reduced integration tend to weigh on overall economic activity. De-globalization, in a broad sense, is still a negative force for global growth and trading volumes.
The key distinction is between short-term impact and long-term trajectory. While the immediate effects may be contained, the cumulative influence of sustained trade friction could become more pronounced over time.
Final thoughts
The emerging narrative is not one of retreat, but of recalibration. De-globalization introduces real challenges – from margin pressure to supply chain disruption and slower trade growth. Yet it also accelerates trends that favor adaptability, strategic positioning, and regional diversification. For EMs, the implications are far from uniform. Some economies and sectors will face headwinds, particularly those tied to commoditized exports or highly concentrated trade relationships. Others, especially those embedded in critical industries or able to position themselves as alternative hubs, may find new avenues for growth. In that sense, the current environment is less about the end of globalization and more about its next phase: a more fragmented, more politically influenced, but still deeply interconnected system. The question, then, is not whether global trade will persist, but which EMs are best positioned to capture its reshaped flows.
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