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Emerging markets were huge beneficiaries of the fall of Communism and the globalization trend that followed it in 1991-2008. Since then, the story has been much darker for poor countries in all regions of the world, with many “emerging markets” ceasing to emerge and relapsing back into long-term poverty. With President Trump’s advent, more protectionism seems likely, and emerging markets may become collateral damage in what will mostly be a battle between the rich. There are however ways forward to prosperity, which emerging market governments must follow, as they have notably not done recently.

The emerging markets story differs from region to region. In Asia, many countries were already growing rapidly before 1990, and only the Asian financial crisis of 1997-98 temporarily halted this growth. Much editorial ink was spilled at that time about the character flaws of Asians that would prevent them from ever prospering, but since 1998 East Asian countries have mostly prospered quite well, with the most robustly capitalist doing best. Even high levels of corruption have not held back Indonesia, for example, which was thought almost ungovernable in 1998.

The Indian subcontinent has had mixed fortunes. India, extremely poor in 1998, has benefited from two good governments, that of Atal Bihari Vajpayee from 1998 to 2004 and, less certainly, that of Narendra Modi since 2014. It has developed major globally competitive manufacturers and, more important an IT and other service sector that may be at least partially tariff-proof. With a domestic market that is now large despite its poverty, India is in a solid position to continue growing its share of world GDP. Conversely, the other Indian subcontinent countries have been generally badly and corruptly run in the last 20 years and are thus less lucky. None of them show the promise they appeared to have around 2000.

In Africa, the past 20 years have shown hope deferred or abandoned. From 2000 to 2008, African countries (except South Africa, still on a long decline that has not yet bottomed) appeared to be undergoing a renaissance. In the first 40 years after independence around 1960, they had mostly adopted some variant of socialism and thereby grown steadily poorer whether or not they were nominally democratic. In the first few years of the new millennium, with rural Africa finally being connected to the world through cellphone networks, the continent appeared to be looking up. Benefiting from abundant natural resources and cheap labor, it seemed that universal connection to the world market for its populace through cellphones was all that was required for success. Since 2010, stagnation and decline have mostly returned, with corruption appearing to worsen.

Finally, in Latin America the last decade has shown a sharp deterioration. Beginning rather earlier than in Africa, that continent appeared to have adopted capitalism and therefore improved its economic position, from a considerably higher base than Africa’s. Then after 2010 and especially after 2018, socialist government after socialist government was elected and the continent is now rapidly regressing into poverty and tyranny. Mexico and Brazil in particular seem unlikely to emerge from their death-spiral in the foreseeable future.

The “funny money” policies of artificially low interest rates in the last 25 years, when examined in the light of emerging market performance, bear a heavy responsibility for their decline since 2008. If all projects can be easily financed, there is no way to distinguish between them. If money is available in gigantic quantities from international institutions, public and private, that demand you waste much of it on green energy projects, you shrug about the interest costs, embezzle part of it, and spend the rest on your own dozy boondoggles. After all, if the supposedly capitalist West has given up worrying about rates of return and economic profitability, why should you not use their money to finance your cousin’s new idiotic but gigantic scheme? If money is infinitely available at low cost (even negative cost in real terms) why should the electorate not vote for bigger social programs and assume the obviously not very important capitalist economy will look after itself?

Tariffs make emerging market economic management more difficult. Previously, if you had natural resources or an abundance of cheap labor, you needed to be truly breathtakingly Marxist and corrupt for multinationals of one sort or another not to exploit your cheap labor and your resources, bringing jobs and a connection to the world economy. Free trade meant a race to the bottom in labor standards and national governance; the combination of free trade and cheap money meant that any government attempting to improve matters, such as Jair Bolsonaro in Brazil, would be voted out at the next election, because the leftist lobby (and ability to steal elections) was so strong. With tariffs, economic success will require genuinely capable, cost-reducing, un-corrupt government; in the long run the economic outlook for the populace must thus be improved.

If President Biden and free trade had continued, Javier Milei in Argentina would unquestionably have lost at the next election, as Argentines voted to end the governmental austerity and increase their social programs. With tariffs in place (and a Milei-friendly government in Washington) the Argentine electorate may realize that it must keep him in power to maintain the fiscal and economic discipline necessary for success.

Tariffs should thus in the long run improve the quality of emerging market governments, by making the more extreme versions of corrupt socialism impossible. Socialist emerging market governments will no longer be able to borrow infinite amounts of cheap money from dozy international financial institutions, making vague promises that the money will be spent on worthy “climate change” objectives. With tariffs, a country will need to produce something genuinely attractive to Western markets at a genuinely competitive price, while offering a domestic regulatory, tax and labor environment that is competitive with other countries in both costs and governance quality.

Argentina’s agricultural products will always be competitive – it has a genuine “comparative advantage” in its huge fertile lands and cheap, skilled farm labor. With tariffs, Europe’s uber-expensive farm subsidies, which keep out Argentine produce, will become impossibly costly as Europe itself will need to find markets and not load its industrial producers with unnecessary costs.

As for low-wage industrial emerging markets, their fate will depend on the immigration policies pursued by the wealthy. If wealthy countries continue to allow free immigration, then the low-wage lobbies in rich countries will simply import workers rather than products, thereby maintaining their profits, immiserating their domestic workforce and making it economically impossible for emerging market workers to stay in their own country, because of the lack of jobs. President Trump needs to realize this; tariffs increase the pressure for labor movement, and whether that labor is legally immigrant, illegally immigrant, or compelled into the semi-slavery of H1B visas, it will impoverish the domestic workforce and waste the benefits of tariffs. As I have explained before, tariffs in the 1890s could have produced a blue-collar Nirvana for American workers, but because of free immigration, they produced only infinite sweatshops and a group of artificially rich Robber Barons.

With tight immigration policies in the West, tariffs can be highly beneficial for emerging markets. They will force better government, because they will make it impossible for Marxist riff-raff to remain in power. They will cause countries to specialize in what they do best, as India has done in software and other products, thus ceasing to be mere sinks of cheap labor exploited by the multinationals.

With emerging market governments eschewing socialism, the global economy will work better and will raise everybody’s living standards. Free trade, free migration and cheap money have caused most emerging markets to lose all discipline in their choices of government. Tariffs, together with higher interest rates, tight immigration controls and, ideally, a de-funding of supranational institutions that lend mostly based on fashionable politics, will restore that discipline and thereby allow emerging market citizens to achieve the riches they deserve.

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