April 11 (Reuters) – Most emerging markets stock indexes were set for weekly declines on Friday after asset classes were thrown into disarray by wavering U.S. trade policies, while a tariff standoff between China and Washington escalated.
Beijing increased its tariffs on U.S. imports to 125% on Friday in response to U.S. President Donald Trump’s decision to hike duties on Chinese goods to 145%, raising the stakes in a trade war that threatens to upend global supply chains.
The offshore yuan slipped 0.1% and was last trading at 7.3 to the dollar – not far from a record low it hit earlier in the week.
Analysts expect that growth in the world’s second largest economy could slow in the first quarter, ramping up expectations of fresh stimulus.
Currencies such as the Indian rupee and South African rand ZA pared initial gains, while the Hungarian forint and the Polish zloty depreciated about 1% each against the euro.
Benchmark stock indexes in India and South Africa also cut gains, while Turkish stocks slipped 0.4% and bourses in Hungary and the Czech Republic fell over 1.7% each.
Chinese equity benchmarks had closed higher by about 0.4% before Beijing’s retaliation, aided by potential state support. The gains of the heavyweight Chinese stocks helped the broader MSCI EM stocks index register a 1.7% rise.
However, the MSCI index was on track for losses for the third straight week and faced its steepest three-week drop since August 2023. Trump’s 90-day pause on some U.S. levies on world economies took effect in mid-week as he said that multiple countries were looking to negotiate trade deals with the U.S.
His fluctuating trade policies have stirred uncertainty about global assets that saw even traditional safe-haven U.S. Treasury bonds incur sharp declines as investors priced in the likelihood of a global recession.
Analysts also suggested that a weakening of the dollar against the Swiss franc and Japanese yen indicated deteriorating confidence in the U.S. economy.
Markets were watching for any signs that global economies were successfully signing new trade deals during the 90-day pause issued by Trump.
“Nobody knows exactly what the deals with the various countries will look like, how many countries are really willing to make a deal, and within what period of the 90 days this will happen,” Commerzbank FX analyst Volkmar Baur said in a note.
“This is not an environment in which I, as a business decision-maker, would want to plan my supply chains for the future.”
Vietnam’s main stock index closed 4.6% higher and the dong inched up 0.2%. A report said the Southeast Asian country, which is heavily dependent on export income, is prepared to crack down on Chinese goods being shipped to the United States via its territory.
Taiwan was looking to negotiate an increase in energy imports from the U.S., while Brazil and Argentina were among the latest looking to engage in trade discussions with Washington.
Investors were also monitoring developments around the International Monetary Fund’s discussions about a fourth review of its $2.9 billion program with Sri Lanka.
The island nation’s dollar bonds were down over two cents on the dollar and on track for a weekly drop of 13.9% – their biggest weekly slide in two months.
Papers of frontier economies have witnessed sharp swings throughout the week as markets priced in an increasing likelihood of widespread debt defaults against an uncertain global backdrop.
(Reporting by Johann M Cherian in Bengaluru; editing by Mark Heinrich)
