The Global Economy’s Underappreciated Source of Emerging Growth

With tariffs stealing headlines throughout 2025, the health of international trade dominates many minds—and its resilience has proven a positive surprise. But trade alone isn’t propping up the global economy. Domestic demand and services sector activity in many Emerging Markets nations have also added to global economic growth, an underappreciated positive fundamental.

Starting in the Western hemisphere, Brazil and Mexico have received a lot of attention because of US trade policy. The former faced lofty “reciprocal” tariffs on diplomatic grounds, though negotiations have mitigated the duties on many foodstuffs. 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 agreement. Its renegotiation now steals headlines and sows some uncertainty.

But the latest GDP reports indicate domestic demand in Latin America’s largest economies has held up despite tariffs. Brazil’s Q3 GDP rose 0.1% q/q, with the services sector expanding 0.1%.^[i] At an industry level, most categories grew, led by transportation, storage and mailing (2.7% q/q). The industry’s swift expansion largely reflects strong commodity production (specifically agricultural commodities) tied to bountiful Q3 harvests.^[ii] On the expenditure side, household consumption rose 0.1% q/q, assuaging concerns weak retail sales (which contracted in July and September) mean Brazilian consumers are “slowing down.” It is a further reminder retail sales reflect only part of total household consumption.^[iii]

For Mexico, Q3 GDP contracted -0.3% q/q, and many analysts warned trade uncertainty could lead to a “technical recession” (often defined as two or more consecutive quarterly GDP contractions).^[iv] Looking under the hood, the industrial sector, which includes tariff-affected construction and manufacturing, drove the decline (-1.5% q/q, -2.7% y/y).^[v] But like Brazil, Mexico’s services sector—which makes up nearly 60% of GDP—chugged along (0.2% q/q, 1.0% y/y).^[vi] While some services firms face tariff fallout (e.g., transportation & warehousing, retail trade), others, including health care and real estate, rely more on domestic demand—and have grown overall this year.^[vii]

Next on our trip is Asia, where most 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%.^[viii] The services sector (9.2% y/y) led the way, buoyed by Financial, Real Estate & Professional Services (10.2%).^[ix] Private consumption expenditures grew 7.9% y/y, accelerating from Q2’s 7.0%, so by most standard metrics, demand is bustling in the world’s fifth-largest economy.^[x] Sentiment toward stocks there was high earlier in 2025. This ran headlong into elevated tariff fear and drove the MSCI India’s huge lag all year (it is up 0.1% year to date in USD versus EM’s 28.6%).^[xi] Now, 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.^[xii] Unlike most developed economies, manufacturing is the single-largest economic industry at around 19% of GDP.^[xiii] However, the quickest-growing industries in Q3 were services-oriented, including Education (10.6% y/y) and Business Activities (9.9%), while manufacturing grew 5.5% y/y.^[xiv] On the expenditures front, final household consumption climbed 4.9% y/y.^[xv] For all the griping in developed economies over consumption trends, these Emerging Asian economies show not all is bleak.

Finally, what about South Africa, the continent’s most industrialized nation? 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.^[xvi] Household final consumption expenditures rose 0.7% q/q while gross fixed capital formation grew 1.6% q/q—its first positive reading since Q3 2024.^[xvii] Statistics South Africa acting Secretary General Joe de Beer said the investment rise was broad-based, from transport and schools to computer software and biological assets.^[xviii]

For investors, we caution against equating GDP with investment opportunities. Rapid GDP expansion doesn’t equate to robust stock market returns—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.