Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How Emerging Market Cargo Routes Are Rerouting Global Trade
Transcript
- Lucas: So if you watched the emerging market ETFs this week, one number jumps out: Brazil's EWZ is up nearly five percent over five days, while China's FXI is basically flat, down a hair. That divergence is not random. Luna: Five percent in a week — that's not a blip. What's driving it? Lucas: A big part is the rerouting of global trade. We've talked before about how cargo routes are shifting, but this week the data is getting concrete. Look at what's happening with Brazil's ports — they're becoming a major transshipment hub for goods that used to go through China-centric routes. Luna: So Brazil is benefiting from the supply chain reshuffling. But is it just about avoiding tariffs, or is there something structural? Lucas: It's both, honestly. The tariff war with China pushed a lot of manufacturing to Vietnam and Mexico, but now we're seeing a second wave — commodity and agribusiness exports are shifting too. Brazil's soybean and iron ore shipments are being rerouted to serve new markets, and its ports are expanding capacity to handle it. Luna: That explains the commodity angle. But China's still the big buyer of Brazilian soybeans, isn't it? Lucas: It is, but the route is changing. Instead of direct shipments, a lot of it is going through new hubs — like the port of Santos is expanding, and there's this new corridor through Peru that connects to the Atlantic. It's like the map is being redrawn in real time. Luna: And that's showing up in the fund flows. EWZ is up nearly five percent — that's money voting for the reroute. Lucas: Exactly. And it's not just Brazil. Look at Mexico's EWW, up nearly three percent, and Taiwan's EWT up two and a half. These are all trade-dependent markets that are being repositioned in the global supply chain. Meanwhile, China's FXI is down — and Alibaba specifically is down almost eight percent this week. Luna: Wow, Alibaba down eight percent. That's a big move. What's behind that? Lucas: A lot of it is regulatory and competitive pressure — the tech rout in China isn't new, but it's weighing on the index. And the broader story is that investors are starting to see the trade reroute as a long-term structural shift, not a temporary disruption. That's what's splitting emerging markets into 'winners' and 'losers' of the new trade order. Luna: So the old 'emerging markets move together' story is really dead. Lucas: I think it's been dying for a while, but this week's numbers confirm it. The trade-weighted dollar is easing slightly — it's down a bit from last week — and that's giving some breathing room to commodity exporters. But it's not a tide that lifts all boats. Luna: And the yuan is stable at 6.72 per dollar. That's interesting — if China wanted to devalue to boost exports, it's not doing that right now. Lucas: Right. That's a deliberate choice. China is focusing on building its own trade networks — the 'belt and road' pivot, plus new trade agreements with Southeast Asia. But the cargo data shows that actual physical trade is moving away from the old east-west axis toward more regional corridors. Luna: Let's dig into that. What does a rerouted trade corridor actually look like on the ground? Lucas: Take the example of the new port in Chancay, Peru — that's a Chinese-built port that's designed to be a gateway for South American exports to Asia. It's supposed to cut shipping times significantly because it connects directly to the Pacific. That's a physical example of the reroute. Luna: So that's infrastructure playing catch-up with trade policy. Lucas: Exactly. And that's why Brazil is up — it's not just commodity prices; it's that the infrastructure is being built to handle more trade. The same is happening in places like Vietnam and India, though the ETF numbers don't all show it yet because they're more diversified. Luna: India's ETF is up half a percent this week — modest. But India's a different kind of story — more domestic demand. Lucas: That's true. India is less reliant on trade routes; it's more of a domestic growth story. But the rerouting is still affecting it, because some manufacturing that left China is landing in India, and that's changing its trade balances. The current account deficit is narrowing, which is a sign of that. Luna: And we should mention that the US trade deficit is still huge — over seventy-three billion in June. But it's actually improving from May. Lucas: Yeah, it's still high, but the direction matters. As the US imports more from places like Vietnam and India instead of China, the deficit might not shrink as much as some hoped, because those countries don't buy as much from the US. But that's a different episode. Luna: So for an investor, how do you play this reroute? Is it as simple as buying the commodity ETFs and avoiding China? Lucas: It's not that binary. Because even within Brazil, you have to pick the right sectors — the ETF captures the whole market, but the reroute benefits ports and exporters specifically. And China isn't going away; it's still the world's factory for many things. But the trade map is definitely being redrawn. Luna: And that's what we're here to help you understand, one piece at a time. And speaking of understanding — if this podcast helps you make sense of the global economy, maybe consider supporting us on buy me a coffee dot com slash fexingo. A couple of dollars a month genuinely helps keep us going. Lucas: Yeah, that's right. It's listener support that keeps this show ad-free. No pressure, but if you've gotten value out of it, it makes a real difference. Luna: So back to the reroute — what should we watch in the next few months? Lucas: Watch the port expansion numbers — you can actually track shipping volumes through ports like Santos or Chancay. And watch how the trade-weighted dollar moves. If it keeps easing, that's a tailwind for emerging markets, but it's not uniform — it's going to favor those with strong trade positions. Luna: And let's not forget the political angle. Trade policy is shifting fast, and that can change the map overnight. Lucas: Absolutely. The reroute is as much about geopolitics as it is about economics. That's what makes this such an interesting space to watch. Luna: Well, we'll be watching it with you. Thanks for joining us on The Emerging Markets Podcast.