Trade conflict opens doors to investing in emerging markets

On May 3, 2025, at the Berkshire Hathaway annual shareholder meeting in Omaha, Christine Phillpotts, an emerging market equities portfolio manager at Ariel Investments, discussed the ongoing trade conflict between China and the U.S. Despite the tensions, she highlighted that China's economy remains attractive for investment. Phillpotts noted that U.S. exports from China to the U.S. constitute less than 3% of China's GDP and have declined significantly over the past decade. She reassured investors that while there could be repercussions from reduced exports, these effects will not be catastrophic for the Chinese economy. Phillpotts elaborated on the potential actions China could take to stimulate its domestic economy amid such trade tensions. She suggested that if the need arises, China's government could implement measures to bolster economic activity, which could foster growth despite international pressures. Additionally, she indicated that recent encouraging signs from both countries might lead to trade negotiations, although she expects prevailing uncertainty to continue influencing the market. Amid this context of heightened unpredictability, Phillpotts pointed out that emerging markets could present unique opportunities for investors. As global trade relationships are remapped in light of the ongoing trade conflict, other nations may reassess their stances, which may favor certain companies in the emerging markets sector. This evolving landscape was viewed by Phillpotts as a potential payoff for those who navigate it prudently. Overall, her comments reflect a cautious optimism about investing in China and other emerging markets, advising investors to remain vigilant in the face of ongoing trade uncertainties and policy fluctuations. The discussion underscores the complexity of international economic relationships and the potential for strategic investment opportunities amid changing global dynamics.