It’s not just the president of the United States that has investors troubled, however. The Federal Reserve has quadrupled interest rates over the past few years. Countries that have borrowed heavily in dollars to fuel economic growth face the prospect of having to pay high additional interest. This deeply damaging bill has forced Argentina to seek help from the International Monetary Fund. The following emerging economies are facing serious challenges:
Turkey
The arrest and prosecution of U.S. pastor Andrew Brunson angered Trump and triggered tit-for-tat trade sanctions. Trump accused Turkish President Recep Tayyip Erdogan of denying human rights, but instead of pushing the case through diplomatic channels, he imposed higher tariffs on Turkish exports of steel, aluminum and automobile products.
In retaliation, Erdogan imposed higher import tariffs on U.S. alcohol, cars and tobacco products. U.S. Treasury Secretary Steven Mnuchin said last week he was prepared to escalate the dispute with a second round of sanctions.
Türkiye is already in a very fragile position. Some of the country's biggest companies have grown rapidly over the past decade, fueled by cheap credit. That credit now costs much more, leaving companies that need to remortgage with hefty refinancing costs.
The Turkish lira has lost more than 40% of its value since January as investors who believe the country may be forced to agree to a bailout from the International Monetary Fund have retreated.
India
The article stated that India is a large importer of commodities including crude oil, electronic products, and gold. It is expected that India will spend approximately US$600 billion on imported products this fiscal year. India's trade deficit widened to $18 billion in July, the highest level in more than five years.
Inflation is likely to rise to 5% from the 4.2% reported last month due to the Trump administration's trade tariff threats and other ongoing protectionist measures, particularly on steel and aluminum products.
Like Turkish companies, Indian companies have also raised large amounts of funds overseas at low loan rates and are worried about the increase in service costs. Turkey's external debt increased to US$530 billion at the end of March, 42% of which will mature in March next year, and interest rates are almost certain to become higher.
It is therefore not surprising that the Indian rupee has fallen to record lows this year, although a 9% depreciation is modest compared with other emerging market economies.
Argentina
Similar to Turkey, Argentina has a double deficit (ie, the difference between public expenditures and the need to refinance loans from U.S. banks).
After a month of relative calm for the peso, the crisis in Turkey sent Argentina's currency tumbling. This triggered a swift response from the country's central bank, which raised interest rates by 500 basis points to 45%.
Argentina is also dealing with a major political corruption scandal. A former vice president has been sent to prison, and more officials are expected to follow.
Argentina has agreed to accept a bailout from the International Monetary Fund.
South Africa
South Africa, Ukraine, Mexico, Indonesia and Brazil are all dealing with currency devaluations amid concerns about their stability.
The article stated that in addition to the Turkish lira and the Argentine peso, the emerging market currency that suffered the most serious impact last week was the South African rand, which fell by more than 10% on the 13th.
Cyril Ramaphosa, who succeeded Zuma as South Africa's president in February this year, promised to revive the country's economy. However, he now faces a public sector deficit, a balance of payments deficit and continued corruption. scandal.
Ramaphosa succeeded in winning pledges from Saudi Arabia and China to pump huge sums of money into the country's infrastructure and financial system, but that has yet to prove enough to appease jittery investors.