European Bank for Reconstruction and Development: Trump's tariff turmoil has not yet affected growth in emerging markets

European Bank for Reconstruction and Development (EBRD) stated on Thursday (February 26) that although U.S. tariff policies have changed global trade routes, they have not severely hit trade as feared. Instead, some developing markets have experienced unexpectedly strong economic growth.

Data shows that over the past year, the economies of 40 countries covered by this development finance institution grew at a rate of 3.4%, exceeding expectations. EBRD Chief Economist Beata Javorcik believes, “The current situation is somewhat more optimistic than last fall… We expect conditions this year and next to be better than last year.”

The EBRD report pointed out that the impact of U.S. President Donald Trump’s trade tariffs has not been as severe as anticipated, and that slowing inflation and large-scale infrastructure spending have played a positive role.

The bank currently forecasts that this year’s growth rate for the economies it covers will reach 3.6%, and 3.7% in 2027, both revised upward by 0.2 percentage points from last fall’s predictions.

Notably, some EBRD member countries have even increased exports to the U.S., especially those related to the AI boom, such as servers, processors, and computing systems.

However, the bank also warned that ongoing trade turbulence could still hinder growth in some economies.

Javorcik pointed out that the full impact of tariffs remains unclear, especially after the U.S. Supreme Court halted Trump’s tariff policies, and as Trump increased the global tariff from 10% to 15%, market uncertainty further grew.

“Such turbulence forces policymakers to focus on urgent issues, responding to shocks that arrive weekly or even daily,” she said. She added that this weakens countries’ ability to address larger problems, such as demographic “time bombs” and other factors threatening living standards.

She also mentioned that due to the ongoing war in Ukraine and the resulting increase in defense spending, governments have entered a “state of emergency,” which may divert funds from other priorities. She emphasized, “Global uncertainty and turbulence may continue, and… this will negatively impact private investment, which is why I have always emphasized the importance of public investment.”

(Source: Caixin)