June 24, 2025 | Emerging Markets Debt

Tariffs Rattle Markets—But EM Debt Endures

Marcelo Assalin, CFA, Partner

Head of the Emerging Markets Debt Team, Portfolio Manager

Featured Fund

WEDIX

Emerging Markets Debt Fund
View Fund
Rattle snake with tail rattling

The United States’ tariff announcement on April 2, 2025, created significant market volatility, as the tariffs were perceived as higher, broader, and more punitive than expected, and the implementation sooner. Since then, the tariff war with many countries has de-escalated, but uncertainty is keeping market volatility alive. On the bright side, we believe the market selloff has provided investors with attractive opportunities to increase allocations to emerging markets (EM) debt.

1. No Shift in Base Case

While policy risks have risen, our outlook is unchanged. We expect a global slowdown—not a recession—and believe disinflation will continue, giving central banks room to normalize policy gradually. As a result, we still expect a slow but steady improvement in global liquidity. And EM debt performance is generally driven by global growth and liquidity. 

2. EM Resilience

EMs appear better positioned than many developed markets to weather a global trade war, thanks in part to the rise of intra-EM trade, which has reduced direct exposure to U.S. tariffs.

EMs now account for nearly half of Chinese outbound trade, and that could increase.

3. Pivoting in China

In China, we expect a mix of monetary and fiscal stimulus, alongside currency weakening, as the government works to cushion the impact of tariffs. China is also likely to accelerate its pivot away from U.S. exports. EMs now account for nearly half of Chinese outbound trade, and that could increase as it expands trade with both EM and developed market partners.

4. Strong Fundamentals, Supportive Technicals

EM debt fundamentals remain solid, with a healthy growth premium over developed markets likely to persist through 2026, in our opinion. Sovereign credit risk appears contained, with no new defaults expected over the next year, leaving EM credit on stronger footing than its developed market peers. On the technical side, we expect continued support from limited net new issuance in 2025, even amid near-term uncertainty over investment flows.

5. Compelling Valuations

Recent credit-spread widening has improved valuations, particularly in high yield, where spreads now sit above long-term averages, so we remain positioned for compression of high-yield and investment-grade spreads. Despite concerns over inflation from potential tariffs, our positive outlook for the 10-year U.S. Treasury yield is unchanged. We see an opportunity for investors to add long-duration exposure to lock in attractive real and nominal yields.

Select opportunities in sovereign, corporate, and local markets chart

Marcelo Assalin, CFA, partner, is the head of William Blair’s emerging markets debt team, on which he also serves as a portfolio manager.

Featured Funds

LU2093691256

Emerging Markets Debt Hard Currency Fund
View Fund

LU2093699408

Emerging Markets Debt Local Currency Fund
View Fund

LU2879845290

Emerging Markets Frontier Debt Fund
View Fund

Featured Strategies

Emerging Markets Debt
View Strategy
Emerging Markets Debt Hard Currency
View Strategy
Emerging Markets Debt Local Currency
View Strategy
Emerging Markets Frontier Debt
View Strategy

Subscribe Now

Want the latest insights on the economy and other forces shaping the investment landscape?

Subscribe to our Investing Insights newsletter. 

Any investment or strategy mentioned herein may not be appropriate for every investor. There can be no assurance that investment objectives will be met. Products and services listed are available only to residents of this jurisdiction and may only be available to certain categories of investors. The information on this website does not constitute an offer for products or services, or a solicitation of an offer to any persons outside of this jurisdiction who are prohibited from receiving such information under applicable laws and regulations. Nothing on this webpage should be construed as advice and is therefore not a recommendation to buy or sell shares.

Please carefully consider the William Blair Funds’ investment objectives, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus and summary prospectus, which you may obtain by calling 1-800-742-7272. Read the prospectus and summary prospectus carefully before investing. Investing includes the risk of loss.

The William Blair Funds are distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

The William Blair SICAV is a Luxembourg investment company with variable capital registered with the Commission de Surveillance du Secteur Financier (“CSSF”) which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). The Management Company of the SICAV has appointed William Blair Investment Management, LLC as the investment manager for the fund.

Please carefully consider the investment objectives, risks, charges, and expenses of the William Blair SICAV. This and other important information is contained in the prospectus and Key Investor Information Document (KIID). Read these documents carefully before investing. The information contained on this website is not a substitute for those documents or for professional external advice.

Information and opinions expressed are those of the authors and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC, or affiliates. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Information is current as of the date appearing in this material only and subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. This material may include estimates, outlooks, projections, and other forward-looking statements. Due to a variety of factors, actual events may differ significantly from those presented.

Investing involves risks, including the possible loss of principal. Equity securities may decline in value due to both real and perceived general market, economic, and industry conditions. The securities of smaller companies may be more volatile and less liquid than securities of larger companies. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks. These risks may be enhanced in emerging markets and frontier markets. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit, and inflation risk. High-yield, lower-rated, securities involve greater risk than higher-rated securities. Different investment styles may shift in and out of favor depending on market conditions. Diversification does not ensure against loss.

Past performance is not indicative of future returns. References to specific companies are for illustrative purposes only and should not be construed as investment advice or a recommendation to buy or sell any security.

William Blair Investment Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission.

Issued in the United Kingdom by William Blair International, Ltd., authorized and regulated by the Financial Conduct Authority (FCA), and is only directed at and is only made available to persons falling within articles 19, 38, 47, and 49 of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons").

Issued in the European Economic Area (EEA) by William Blair B.V., authorized and supervised by the Dutch Authority for the Financial Markets (AFM) under license number 14006134 and also supervised by the Dutch Central Bank (DNB), registered at the Dutch Chamber of Commerce under number 82375682 and has its statutory seat in Amsterdam, the Netherlands. This material is only intended for eligible counterparties and professional clients.

Issued in Switzerland by William Blair Investment Services (Zurich) GmbH, Talstrasse 65, 8001 Zurich, Switzerland ("WBIS"). WBIS is engaged in the offering of collective investment schemes and renders further, non-regulated services in the financial sector. WBIS is affiliated with FINOS Finanzomubdsstelle Schweiz, a recognized ombudsman office where clients may initiate mediation proceedings pursuant to articles 74 et seq. of the Swiss Financial Services Act ("FinSA"). The client advisers of WBIS are registered with regservices.ch by BX Swiss AG, a client adviser registration body authorized by the Swiss Financial Market Supervisory Authority ("FINMA"). WBIS is not supervised by FINMA or any other supervisory authority or self-regulatory organization. This material is only intended for institutional and professional clients pursuant to article 4(3) to (5) FinSA.

Issued in Australia by William Blair Investment Management, LLC (“William Blair”), which is exempt from the requirement to hold an Australian financial services license under Australia's Corporations Act 2001 (Cth). William Blair is registered as an investment advisor with the U.S. Securities and Exchange Commission (“SEC”) and regulated by the SEC under the U.S. Investment Advisers Act of 1940, which differs from Australian laws. This material is intended only for wholesale clients.

Issued in Singapore by William Blair International (Singapore) Pte. Ltd. (Registration Number 201943312R), which is regulated by the Monetary Authority of Singapore under a Capital Markets Services License to conduct fund management activities. This material is intended only for institutional investors and may not be distributed to retail investors.

Issued in Canada by William Blair Investment Management, LLC, which relies on the international adviser exemption, pursuant to section 8.26 of National Instrument 31-103 in Canada.