06:46 AM EDT, 04/09/2025 (MT Newswires) -- Emerging market (EM) currencies have correctly sharply lower so far this month triggered by United States President Donald Trump's plans for "reciprocal tariffs" that have fuelled "fears" of a sharper slowdown/recession for the global economy, said MUFG.

The worst hit EM currencies have been South Africa's ZAR (-7.2% versus the US dollar), Colombia's COP (-5.5% versus USD), Brazil's BRL (-5.1%) and Chile's CLP (-4.9%), wrote the bank in a note to clients.

In contrast, Romania's RON (+2.3% versus USD), Czech Republic's CZK (+1.1%) and Hungary's HUF (+0.7%) have all held up better so far.

President Trump's plans for "reciprocal tariffs," including applying a universal 10% baseline tariff to all trading partners alongside higher rates for the 60 "worst offenders," have significantly increased downside risks for global trade and growth, stated MUFG.

The subsequent sharp sell-off in global equity markets and widening of credit spreads is reinforcing downside risks to global growth. EMs, including Asian countries, will be hit by some of the highest "reciprocal tariffs."

President Trump plans to impose a tariff of 34% on China, a tariff of 46% on Vietnam, a 37% tariff on Thailand, 32% tariffs on Taiwan and Indonesia, a 27% tariff on India and a 26% tariff on South Korea. South Africa will also be hit with a higher 31% tariff.

In contrast, Latin American economies have gotten off relatively lightly, with Brazil and Chile subject to only 10% tariffs.

It would suggest that trade disruption from tariffs will be worse for Asia and will continue to place downward pressure on regional currencies, pointed out the bank.

In addition, it has encouraged speculation that China could devalue the CNY rather than prioritizing stability. It has been reported that Chinese policymakers are already considering bringing forward plans for stimulus to support domestic demand growth, according to MUFG.

Building concerns over a sharper global slowdown/recession have weighed more heavily on commodity prices and related EM currencies. It has resulted in Latin American currencies underperforming alongside other commodity currencies such as the ZAR, even though they were hit by relatively smaller tariffs. The ZAR has been undermined as well by negative domestic political developments after the government passed the Budget without support from the Democratic Alliance party, casting doubt on the sustainability of the coalition.

Elsewhere within European, Middle East and Africa foreign exchange, Poland's PLN has weakened more in response to the dovish policy signal from central bank (NBP) Governor Adam Glapinski who surprisingly indicated that the NBP could start to cut rates sooner in May by even 50bps, and by more than 100bps by the end of this year if the government prevents energy prices from rising.

It has helped to lift EUR/PLN to the 4.3000 level after hitting a low of 4.1272 at the end of February, which was the lowest level since 2015. It has meant the PLN has underperformed other regional currencies of the CZK and HUF, added the bank.