ARTHUR KAMP AND FEROZ BASA: Trump and the turning tide for emerging markets

As global headlines once again turn toward multilateral relations, it may feel as though we have been here before. Yet this moment is different.

Beneath the political theatre is a deeper rebalancing of the international economic landscape — one that is steadily shifting advantage away from developed markets and toward emerging economies. For investors, the task is not simply to react to headlines but to recognise the underlying direction of travel.

A new phase of protectionism

The latest round of US tariffs should be understood as a supply shock: one that lifts prices while weighing on growth. We are seeing renewed inflation in durable goods, even as rental inflation eases. Core inflation remains relatively sticky around 3%. At the same time, growth has held up better than expected, supported by household wealth and healthy corporate earnings.

However, the deeper point is structural. Even if the courts limit certain presidential powers, there remain multiple avenues to pursue a more protectionist stance. Protectionism is not a temporary deviation — it is increasingly part of the global policy environment. This is contributing to a more fragmented world in which economies prioritise resilience and domestic capability over global efficiency.

The dollar cycle is turning

This environment also feeds into the trajectory of the dollar. A large and persistent current account deficit, combined with rising fiscal pressures, likely requires a weaker currency and fiscal consolidation to “correct”. After a decade of broad dollar strength the conditions that supported that cycle are beginning to shift.

For the first time in years a growing number of market strategists are projecting a weaker dollar over the medium term. Historically, periods of dollar weakness have been supportive of emerging-market performance. The US has enjoyed a remarkable decade of outperformance, led by exceptional corporate profitability, dominant technology leadership and strong consumer spending. However, markets move in cycles. No single geography outperforms forever.

Emerging markets move to centre stage

For much of the past decade emerging market growth was accessed indirectly, through developed-market multinational companies. That dynamic is changing. We are now seeing genuine earnings growth and value creation originating within emerging markets themselves. India continues to deliver strong, sustained growth. China is managing its property market adjustment while continuing to invest in advanced manufacturing and innovation-driven sectors.

Beyond these two giants we see selective opportunities across a broader set of emerging economies, supported by attractive currency valuations and improving fundamentals. Even after recent gains emerging markets trade at roughly 14 times earnings — compared with around 22 times in developed markets — with higher free-cash-flow yields. For investors with a five-year view, the valuation gap matters.

Africa’s growth story strengthens

Recent data shows a widening divergence in Africa’s growth trajectories. Trend GDP growth is robust in several economies — including but not limited to Uganda, Kenya, Rwanda, Ivory Coast and Egypt — while firming in others such as Nigeria, often reflecting reform programmes and new investment in hydrocarbons.

This resilience underscores that even amid global uncertainty, many African economies are generating momentum from domestic reforms and regional integration. In aggregate, policy interest rates across Sub-Saharan Africa are easing, alongside a gradual moderation in inflation. On balance, we expect the West and East African economies to deliver the continent’s strongest growth in the coming years.

Longer-term prospects will hinge on demographics, governance and productivity. With the African Continental Free Trade Area expected to gather traction, the continent’s demographic dividend, structural reform and growth prospects position it as a compelling emerging-market story. However, the debt burden — already leading to restructuring in some countries — and ongoing liquidity constraints, remain critical challenges that must be addressed effectively across several economies.

A supportive commodity backdrop

The energy transition and ongoing infrastructure investment require substantial inputs, from metals to energy minerals. Yet global investment in new production capacity has lagged. When demand recovers meaningfully, supply constraints can support commodity-linked economies, including South Africa.

In the near term there may be volatility as policy and legal developments unfold. However, the longer-term forces are clearer. Developed markets face slower structural growth, ageing populations and rising debt burdens. Many emerging markets have stronger potential growth trajectories and more favourable fiscal positions.

This is not a story of decline in the developed world, but of rebalancing. The next chapter of global growth is unlikely to mirror the last one. For investors this is a moment to broaden — not narrow — global exposure. The opportunity in emerging markets is structural, not short term.

It requires patience, diversification and a mindset that looks beyond recent market dominance. The tide is turning. And for emerging markets— including SA — it is turning in their favour.

•Kamp is chief economist, and Basa head of global emerging markets, at Sanlam Investments.