•Information reflects news as of April 9th
In recent weeks, global markets have been on edge following the introduction of new U.S. tariffs, part of the Trump administration’s ongoing shake-up of international trade norms. While much of the media’s focus has centered around the U.S. relationships with China and the EU, there’s another important piece to the puzzle — the impact on emerging and frontier markets. Verto’s Director of Trading Charlie Bird digs into how Trump’s tariffs are influencing nations like Nigeria, Kenya, and others across the frontier market landscape.
Tariffs' direct impact? Limited — at first glance
Many frontier markets, by virtue of their more limited integration into global trade networks, have so far seen only modest direct economic consequences from the tariffs. Take Nigeria, for instance — estimates suggest a trade balance adjustment of around $100 million annually. In a country of Nigeria’s size and economic complexity, that’s not an earth-shattering figure. Compare that to the billions of dollars at stake for China or the EU, and it’s clear these markets aren’t the main targets — or the primary collateral.
But direct trade numbers only tell part of the story.
The double-edged sword of oil prices
Emerging markets often live and die by commodities. With Trump’s tariffs stoking fears of a global slowdown and recession, oil prices — once rallying north of $75 a barrel — have tumbled to below $60 in short order. For oil-reliant economies like Nigeria, this has spelled trouble.
The naira, Nigeria’s currency, is now feeling the pressure. In the span of days, it depreciated by around 100 naira, wiping out some of the Central Bank's previous stabilization efforts. In response, $50 million in U.S. dollars was injected into the market by the Central Bank — a bold move, but possibly akin to a garden hose trying to quell a forest fire.
The volatility underscores how even second-order effects of global policies can spark local currency crises in frontier markets.
Capital flows and the "Risk-Off" reversal
In past global shocks — the 2008 crisis or COVID’s early days — investors would flock to the U.S. dollar and Treasuries. But this time? Not so fast.
With the U.S. potentially staring down significant interest rate cuts (100 basis points were being priced in at one point), and recession fears mounting at home, the usual “safe haven” narrative has shifted. Instead, currencies like the Swiss franc, the yen, and even the euro are drawing more of the risk-off capital.
This presents a unique moment for emerging markets. Yes, there’s capital outflow — there always is during global uncertainty. But the magnitude has been somewhat muted. Investors, unsure where to flee, are holding their positions, for now.
If markets stabilize or positive developments emerge from ongoing trade negotiations, these hedged positions could stay in-country, allowing frontier markets to weather the storm better than expected.
Country-specific repercussions for Kenya, Tanzania & the CFA zone
Kenya, already navigating the expiration of an IMF program and an $850 million budget gap, now faces increased pressure. With the Central Bank of Kenya defending the shilling aggressively, there's concern over how long this can be sustained — especially as the exchange rate creeps above 130. The shilling, seen as overvalued, might be approaching a correction.
Tanzania seems more insulated, with a relatively stable shilling and less immediate vulnerability to global trade turbulence. That said, the knock-on effects from neighboring economies and commodity volatility will still matter.
Francophone Africa, particularly the CFA zone pegged to the euro — is experiencing whipsaw volatility. Normally aligned with euro moves, the region's currencies have seen unexpected depreciation. It’s a reminder that even fixed or semi-fixed currency regimes aren’t immune in turbulent times.
Is stability or the storm on the horizon?
The full fallout from Trump’s tariffs on frontier markets is still unfolding. So far, direct impacts have been relatively modest, and many economies have shown resilience. But the real story lies in the second-order effects — oil price collapses, shaky investor confidence, and pressure on central banks to hold the line.
Much depends on the next chapter in global trade talks. If a resolution materializes, frontier markets might emerge with only bruises, not breaks. But if tensions escalate or new reciprocal tariffs are introduced, even insulated economies may feel the aftershocks more acutely.
For now, cautious optimism remains. Hedged capital hasn’t fled en masse. Central banks are responding, albeit with limited firepower. And some investors are still betting that emerging markets can continue treading water — even as the trade winds grow stronger.
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