Under Donald Trump’s second presidency, the world is being sliced into friends, foes and an uncomfortable grey zone in between. For emerging market countries, that sorting mechanism has real consequences for capital flows, trade access and asset prices.
From an investor’s perspective, the conclusion is clear. It usually pays to be on good terms with President Trump, but not always, and never unconditionally. Trump’s America is muscular, transactional and largely uninterested in the comforting language of shared values. Interests, not ideals, drive the agenda.
This forces investors to see the world through a distinctly binary prism: alignment or non-alignment with Washington. The risk this year is not just volatility, but deeper geopolitical fragmentation, with sanctions, tariffs or even military action used to reward loyalty or punish dissent.
Nothing illustrated that more starkly than January’s “large-scale strike” on Venezuela and the capture of Nicolás Maduro and his wife. Framed as a reassertion of the Monroe Doctrine, the intervention was also about oil, rare earths, China’s footprint and migration. Venezuela’s fate sent a blunt signal across the world: posture politics is over, fall in line or risk consequences.
Argentina also offers the clearest case study in how alignment plays out in practice. Javier Milei embraced Trumpism with enthusiasm. CPAC appearances, chainsaw theatrics, withdrawal from climate talks and vocal support for Israel. When markets began to wobble after disappointing local election results, the US Treasury stepped in with “whatever it takes” assurances. That bought Milei time and stabilised assets, though US support came with conditions around governability and reform. Being on-side helped, but as usual, it came with strings attached.
Brazil, by contrast, tried to tread carefully. It avoided open confrontation on ideological differences from Trump, but it didn’t help. When Brazil’s independent judiciary prosecuted Jair Bolsonaro for his coup attempt, Washington responded with punitive 50 per cent tariff. The message was sobering: even friends can be punished if domestic decisions collide with Trump’s political agenda. It can happen overnight as Colombia learned after late-night complaint from President Petro about deportations triggered a swift 25 per cent tariff hike, reversed only after hurried diplomatic contrition.
While only playing a part in investment decisions, Trump’s America means investors have an even sharper eye on political rhetoric as much as fiscal policy when assessing risk.
And then there is Russia. Friend or foe? The signals are contradictory. Trump’s is taking action to normalise relations with Putin, even at Ukraine’s expense. Russia has traditionally been an adversary, but Trump has publicly called Putin a friend. This underscores just how fluid these categories can be. Meanwhile, Ukraine and Europe are left playing for time, hoping to avoid being firmly labelled either.
So, does it benefit global players to stay on good political terms with Donald Trump? Most of the time, yes. Alignment can unlock support, soften shocks and buy valuable breathing room. But it is not a shield. Domestic institutions, elections, judicial independence or simple political missteps can still trigger retaliation.
For emerging market investors, the task for the remainder of his Presidency is to identify which countries can align without losing policy coherence, and which are merely renting favour at a price that will eventually be called in.
In a world that is increasingly categorised by allegiance to Trump, geopolitics is no longer a backseat consideration, it is almost an asset class in its own right.
The author is emerging markets senior sovereign strategist at RBC BlueBay
