Lowering tariffs on U.S. exports may unintentionally benefit other countries more than the U.S.

    by VT Markets
    /
    Jul 30, 2025
    Recent cuts to tariffs on U.S. exports have global effects, according to economists at JPMorgan. While the impact on U.S. growth may be small, changes in global trade rules could benefit many countries. The World Trade Organization’s Most Favoured Nation principle states that if one country lowers tariffs on U.S. goods, it must also lower them for all other MFN partners. This means that countries cutting tariffs on U.S. products also lower them for other nations, including emerging markets.

    Effects on Emerging Markets

    Economists point out that these trade deals may unintentionally benefit third countries. For example, when tariffs on U.S. agricultural imports are reduced, it could boost exports from other MFN countries more than those from the U.S., affecting markets and economic models. It seems that recent tariff cuts on U.S. exports are not the main interest for traders. The real opportunity lies in the broader effects of global trade rules. Because of the Most Favored Nation principle, these tariff cuts influence many other countries, creating a wider impact than expected. This isn’t just a theory; the data shows early signs of this trend. After recent trade talks that resulted in lower tariffs on U.S. goods, export volumes from emerging markets rose by 1.5% in the last quarter. Additionally, net inflows into emerging market ETFs reached a six-month high in early July, indicating some capital is already shifting.

    Opportunities in Derivatives and Currency Markets

    In the coming weeks, we see a strong opportunity in the derivatives market. We are considering call options on emerging market indices, like the MSCI Emerging Markets Index, which appear undervalued. The market may not yet reflect the potential gains for export-oriented economies outside the U.S. Historically, trade liberalizations, like those after 2001, have led to long-term gains for assets in developing nations. We expect that currencies of emerging markets focused on exports could strengthen against the dollar. Thus, using currency options or forwards could be another way to benefit from this trend. We’re focusing on sectors in third-party countries that compete directly with U.S. exports, such as agriculture and manufactured goods. For instance, if a country reduces tariffs on U.S. soybeans, it also makes Brazilian or Argentine soybeans cheaper for itself. This distribution effect may be overlooked in current market pricing. Create your live VT Markets account and start trading now.

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