The Global Economy’s Underappreciated Source of Emerging Growth

America’s tariffs led financial headlines we read throughout 2025, and the health of international trade dominated that conversation. Its resilience has proven a positive surprise, in our view. But trade alone isn’t propping up the global economy, according to our research. We have found domestic demand and services sector activity in many Emerging Markets nations have also added to global economic growth, which we think is an underappreciated positive fundamental.

Starting in the Western hemisphere, Brazil and Mexico have received a lot of attention in tariff coverage we read because of US trade policy. The former faced lofty so-called reciprocal tariffs on diplomatic grounds, though negotiations have mitigated the duties on many foodstuffs.^[i] The US is by far the latter’s largest trading partner, so tariff threats understandably stirred uncertainty—despite most trade remaining tariff-free under the US-Mexico-Canada free trade agreement.^[ii] That pact’s renegotiation now leads some headlines we follow and sows some uncertainty.

But the latest GDP (gross domestic product, a government-produced measure of economic output) reports indicate domestic demand in Latin America’s largest economies has held up despite tariffs.^[iii] Brazil’s Q3 GDP rose 0.1% q/q, with the services sector expanding 0.1%.^[iv] At an industry level, most categories grew, led by transportation, storage and mailing (2.7% q/q).^[v] The industry’s swift expansion largely reflects strong commodity production (specifically agricultural commodities) tied to bountiful Q3 harvests.^[vi] On the expenditure side, household consumption rose 0.1% q/q, assuaging some warnings we have seen that weak retail sales (which contracted in July and September) mean Brazilian consumers are slowing down. We think broader spending’s overall Q3 growth is a further reminder retail sales reflect only part of total household consumption.^[vii]

For Mexico, Q3 GDP contracted -0.3% q/q, and we read several analyses arguing trade uncertainty could lead to a technical recession (an economic downturn often defined in financial publications we read as two or more consecutive quarterly GDP contractions).^[viii] Looking under the bonnet, the industrial sector, which includes tariff-affected construction and manufacturing, drove the decline (-1.5% q/q, -2.7% y/y).^[ix] But like Brazil, Mexico’s services sector—which makes up nearly 60% of GDP—chugged along (0.2% q/q, 1.0% y/y).^[x] Whilst some services firms face tariff fallout (e.g., transportation & warehousing, retail trade), others, including health care and real estate, rely more on domestic demand according to our observations—and have grown overall this year.^[xi]

Next on our trip is Asia, where financial commentators we read usually focus on China, South Korea or Taiwan. Let us look past them to India, where GDP rose 8.2% y/y in Q3, one of the world’s fastest rates and speeding from Q2’s 7.8%.^[xii] The services sector (9.2% y/y) led the way, buoyed by Financial, Real Estate & Professional Services (10.2%).^[xiii] Private consumption expenditures grew 7.9% y/y, accelerating from Q2’s 7.0%, so by most standard metrics, demand appears to be bustling in the world’s fifth-largest economy.^[xiv] Sentiment toward stocks there appeared high early in 2025, but we think this ran headlong into elevated tariff fear and drove the MSCI India’s huge lag all year (it is down -6.0% year to date in GBP versus the MSCI Emerging Markets Index’s 20.7%).^[xv] Now, we think sentiment is starting to cool—a matter worth watching in the new year.

As for Indonesia, Southeast Asia’s largest economy, Q3 GDP grew 5.0% y/y.^[xvi] Unlike most developed economies, manufacturing is the single-largest economic industry at around 19% of GDP.^[xvii] However, the quickest-growing industries in Q3 were services-orientated, including Education (10.6% y/y) and Business Activities (9.9%), whilst manufacturing grew 5.5% y/y.^[xviii] On the expenditures front, final household consumption climbed 4.9% y/y.^[xix] For all the griping in developed economies over consumption trends, we think these Emerging Asian economies show not all is bleak.

Finally, what about South Africa, the African continent’s most industrialised nation?^[xx] Q3 GDP expanded 0.5% q/q after Q2’s 0.9%—its longest growth streak since 2021—as the trade industry grew 1.0% and added 0.1 percentage point to growth.^[xxi] Household final consumption expenditures rose 0.7% q/q whilst gross fixed capital formation grew 1.6% q/q—its first positive reading since Q3 2024.^[xxii] Statistics South Africa noted investment rise was broad-based, from transport to computer software.^[xxiii]

For investors, we caution against equating GDP with investment opportunities. Rapid GDP expansion doesn’t equate to robust stock market returns, based on our research—which India’s 2025 puts an exclamation point on. But we highlight these Emerging Markets’ trends to illustrate a broader theme: Despite how tariffs have dominated headlines this year, global economic growth has remained on solid ground. We have plenty of examples in the developed world, and Emerging Markets corroborate the story—better-than-appreciated economic reality underpinning global growth this year.