Brazil’s Market Is Thriving Amid Global Trade Shifts

By Scott Crawshaw, Analyst and Portfolio Manager | July 24, 2025

President Donald Trump’s trade wars have roiled global markets. Recently, he threatened Brazil with a 50% tariff unless the country drops an investigation into its former president. But the US trade war with the rest of the world hasn’t stopped trade. Indeed, for Brazil, its trade has increased since Trump’s first term, as seen in the chart above. Partially that is because Brazil’s exports to the US are only about 10% of its total exports and account for less than 2% of the country’s GDP.

Most of those exports are commodities such as oil, iron ore, beef, and coffee, all of which can easily be sold to other countries. And that is what has been happening. In fact, companies in Emerging Markets (EMs) around the world have responded to Trump’s trade wars by turning to other EMs as a replacement market.

MercadoLibre, Brazil’s ecommerce champion, shows the trend in both directions: It was actually founded in Argentina in 1999 and today operates in 18 countries across Latin America. It launched in Brazil in 2001 when it bought the Brazilian subsidiary of European online auction site iBazar. Over the last decade, since Trump’s trade wars started, the company has stepped up its presence in Brazil.

Other e-commerce firms from Asia such as Sea’s Shopee and Alibaba’s AliExpress are also committing significant capital to tap Brazil’s vast consumer market and the opportunities the country offers in high-margin industries that result in strong returns on invested capital. For MercadoLibre, AliExpress, and Shopee, the increased competition could lead to an increase in adoption, which could help those three and hurt smaller platforms and retailers. For Brazil, the fresh investment helps underscore it as an attractive destination for businesses while also forcing international companies doing business there to become more competitive to meet both the opportunities and challenges of a new, more global marketplace.

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For Companies, the Tariff Question Folds Back Into Competitive Advantage

By Sean Contant, CFA, Analyst, and Sergei Pliutsinski, Analyst | May 21, 2025

For investors trying to discern the effects of the Trump administration’s tariff policies on their stocks, there is a quick-and-dirty way to perform their analysis: Look at the countries in which a company manufactures its products, look at the tariffs applied to that country, multiply the top line by the tariff rate, and subtract that from gross profits.

In doing that, investors are assessing the first-order (direct impact on companies) and second-order (impact on demand) effects of the tariffs. That is what investors seemed to do in the wake of Trump’s April 2 announcement that the US would apply tariffs to virtually every country in the world. Shares of sporting-goods manufacturer VF Corporation, which has substantial operations in China and Vietnam, fell 41%. Hong Kong-based power-tools maker Techtronic Industries fell 23%. Polaris, which makes sports vehicles and has its largest factory in Mexico, fell 25%. French electrical-equipment manufacturer Schneider Electric fell 11%.

But the best indicator of how the tariffs will affect corporate profits comes from looking not at the first- or second-order effect, but at a third-order effect: The effect on companies’ competitive position. Companies don’t operate in a vacuum. They compete against each other. Yes, every company doing business in the US has to contend with the tariff issue. But some companies are better equipped to do so than others just by the nature of how their operations and supply chains have been set up. That is where the competitive advantages will become apparent. A foreign-domiciled company may not be at any disadvantage to a US-based one, and vice versa.

This is how we evaluate companies. The cornerstone of our analysis is the competitive-forces framework designed by Harvard University professor Michael Porter. Competitive strategy, as the field has come to be called, looks not just at a company’s internal fundamentals, but also compares them to its peers across its industry.

Consider Schneider and its competitor Eaton Corp. Schneider Electric makes equipment for electricity distribution and industrial controls and is based in Rueil-Malmaison, France. Eaton, which also makes equipment for electricity distribution, has its operations based in Ohio. Ostensibly, that would give Eaton a leg up over Schneider. But these companies have virtually the same manufacturing footprint and supply chain despite the different domiciles. Schneider has about 20 factories in the US. So it isn’t likely to lose any ground to Eaton, at least not due to tariffs.

An even better example is Techtronic and its competitor Stanley Black & Decker. Techtronic is based in Hong Kong and owns the Ryobi and Milwaukee brands. It was a pioneer in battery-powered, cordless power tools. Stanley is based in Connecticut and makes the Black & Decker, Craftsman, and DeWalt brands. Again, one company is based in the US and the other is based overseas. But both companies’ manufacturing operations are based overseas so the real issue is where overseas they are.

Stanley Black & Decker has about 24% of its power-tools manufacturing capacity in Mexico, and 18% in China. Techtronic also has production in Mexico and China. But it is already in the process of moving its China production out of the country, which it plans to complete this year, and importantly already has a substantial portion of its power-tools manufacturing in Vietnam. Stanley is also planning to move production out of China, but is further behind in that process. It will likely take one to two years to complete. Currently, Vietnam’s tariffs are at 10% while Mexico is at 25% for non-USMCA-compliant goods and China’s now at 30%. Therefore, Techtronic has an advantage in already having production in Vietnam and in being further along in moving its production out of China. The advantage could of course shift if the tariffs increase or decrease, but the analytical framework remains in place.

Looking at the tariff question this way doesn’t mean a company won’t be affected by them. The economic consensus is that the steep tariffs will hurt everybody. But examining that potential pain through the lens of competitive advantage provides a clearer picture of how companies will be affected, and which ones will come out stronger.

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Currency Depreciation: A Rational Response to Tariffs?

By Ferrill D. Roll, CFA, Chief Investment Officer | January 16, 2025

The US dollar’s rise since September cut into international markets. Of the 7% decline in international markets in the fourth quarter, the vast majority of it can be attributed to currency depreciation against the dollar.

For countries facing harsh new tariffs from the US, weakening the currency is a highly rational response: What tariffs take away in competitive pricing from other countries, currency depreciation restores with little cost to the domestic economy, keeping products competitive in the destination market. In other words, currency depreciation negates the disinflationary effects of a strong dollar as offsets to the inflationary effects of tariffs.

If a country has few other considerations (such as high foreign debts), that trade-off is fairly painless and blunts the potency of the tariffs to alter any other policy or behavior. So far that’s not what you see in this recent spate of currency depreciation: The two countries currently facing the severest threats from additional US tariffs are China and Mexico, but neither of those currencies exhibited much weakness during the fourth quarter as seen in the above chart. However, in the longer term, we think currency depreciation may not be such a bad thing for the US’s trading partners.

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Surplus Surprise: Vietnam, Emerging Markets Top Global Trade with US

By Sergey Dubin, CFA, Analyst and Portfolio Manager | January 28, 2025

Frontier emerging markets (FEMs) fell in the fourth quarter after the election of Donald Trump in the US ushered in expectations that tariff hikes on a broad range of imports to the US will lead to inflationary pressure. Vietnam was one of the worst-performing FEMs, for good reason: the US is its largest export market. Its exports to the US account for more than 25% of its GDP, by far the largest percentage among FEMs. Exports to the US don’t account for more than 5% of the GDP in any other FEM country (though the US is the largest export market for the Philippines, which also weighed down FEMs in the fourth quarter).

In fact, Vietnam is the only FEM that has become one of the ten largest trading partners with the US. While there are other EM countries, such as Mexico, Taiwan, and India among the top-ten US trading partners, Vietnam has grown a significant trade surplus with the US, due in part to companies rerouting shipments through the country as supply chains have adjusted over the past several years, especially in the wake of disruptions during the COVID-19 pandemic.

Out of Our Minds

Brazil’s Market Is Thriving Amid Global Trade Shifts

For Companies, the Tariff Question Folds Back Into Competitive Advantage

Currency Depreciation: A Rational Response to Tariffs?

Surplus Surprise: Vietnam, Emerging Markets Top Global Trade with US

Disclosures