How the US Election Could Impact CEEMEA Equities – JPMorgan

The upcoming US election is poised to affect the economies of Central and Eastern Europe, the Middle East, and Africa, and JPMorgan is analyzing the potential repercussions.

The investment bank has examined four critical policy areas likely influenced by the US presidential elections: tariffs, the dollar, oil prices, and Ukraine, and how these may impact equities in CEEMEA.

Regarding tariffs, particularly the proposed 60% tariff on Chinese goods championed by the Republican candidates, JPMorgan anticipates that this will restrict the production volumes and pricing power of mid-tech manufacturers in regions like Central Europe and Turkey. Although Poland and Turkey’s direct exports to the US are relatively low, the interconnectedness of Emerging Europe within the larger European industrial landscape means that such tariffs could still have a deleterious effect.

In contrast, commodity exporters like South Africa and those in MENA might not experience significant direct consequences from these tariff policies. However, the secondary effects of the tariffs could shift Chinese exports away from the US toward other global markets. This shift could benefit regions like MENA and South Africa, which may receive cheaper Chinese goods seeking new destinations. If the EU decides to restrict imports from China, Central Europe and Turkey could capture a larger share of European manufacturing as Chinese products are excluded. Conversely, if the EU does not impose limits, these regions could face reduced production and exports as China diverts sales to Europe.

On the subject of the dollar, a Republican victory alongside the tariff policy is likely to strengthen the currency. Analysts note that a stronger dollar will have a clear impact on CEEMEA equities, benefiting USD-pegged MENA assets while negatively affecting others. South African equities are expected to experience the most adverse effects from a stronger dollar, followed by Emerging European and Turkish equities. Though Turkish equities have historically shown sensitivity to changes in the dollar, their correlation to global factors has diminished since significant policy changes in mid-2016.

In terms of oil, many investors believe a Trump victory aligns with several Gulf Cooperation Council foreign policy goals. However, Trump has also focused on reducing overall price levels to pre-COVID standards and cutting gasoline prices significantly. JPMorgan speculates that this could lead to policies aimed at stabilizing oil prices, potentially involving some cooperation with OPEC, even at the cost of US oil production—albeit this is seen as a small possibility.

A Democratic presidency is likely to continue current policies, which have increased US energy production by around 3.8 million barrels per day during the Biden administration.

Lastly, JPMorgan considers the relationship between Europe, particularly Ukraine, and the US. Trump’s stated intention to promptly end the Russia-Ukraine conflict may suggest a willingness to recognize Russian control over much of Eastern Ukraine, undermining the post-World War II consensus that international borders cannot be altered by force and contradicting the positions of many European and North American NATO allies. Should Trump halt military aid to Ukraine, it could create further rifts between the US and key NATO members.

In contrast, a Harris administration is expected to maintain ongoing assistance to Ukraine, with minimal changes likely affecting the current status quo.