Trading on Tariffs: Weighing Alternative Investments in an Uncertain International Trade Environment

Given uncertainty from tariffs has become one of the dominant finance stories of the year, in this article we explore the potential impacts to alternative investments and specifically the performance of emerging markets.

To account for China being the biggest question mark in tariff negotiations, we’ve swapped Asia-Emerging for Asia-Developed in our Cobalt data to assess where investors could turn if the uncertainty continues.

Key Takeaways

We see these geographies fall into two groups: Those that produce roughly 3% returns (Latin America, Europe – CEE & CIS, and Emerging Market generalists) and the outperformers (Asia-Developed and Middle East & North Africa, or MENA). This is not too surprising, as Developed Asia is by nature a more mature market, and MENA has seen strong flows of cash in private markets over the past two decades.

Two recent deals highlight the Developed Asia and MENA operating environments, which may provide opportunity for further outperformance. The first being Skechers’ take private by 3G. This deal signals the general concerns over pending taxes on Chinese-produced goods. It might provide Skechers flexibility to move operations elsewhere, and many other companies could do the same. As a result, international investors still looking for exposure to Asian markets could potentially shift their focus to the more developed countries in the region.

The other deal is OpenAI’s acquisition of IO and the launch of Stargate UAE. The former is a sign of the size and types of deals we may come to see more frequently through the rest of the decade from the AI space. The launch of Stargate in the UAE, the first OpenAI country partnership, shows the region is angling to be a leader in the nascent industry and could prove to be a region investors flock to for exposure in the space.

Looking Ahead

While public markets have stabilized somewhat since the initial tariff announcements, there is still much uncertainty for investors to navigate this year. They will have to stay agile and flexible as tariff policies unfold.

The potential shift of production to developed Asian markets from China is a pivotal trend that could shape private markets in the latter half of the decade. It could also create more investment opportunities in other emerging markets, and MENA gaining a foothold as a preferred region for AI firms could put it in a more competitive position. 

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.