By BLOOMBERG

LAGOS • Just when it looked like things couldn’t get much worse for emerging markets (EMs), along comes a trade war. And it’s hitting EM commodity suppliers and exporters to China especially hard.

Take Thailand and South Africa, which each ship about 20% of their foreign-bound goods to China. The Thai baht has just reversed year-to-date gains against the dollar, while the South African rand is down 1.9% this week, the most among 24 major emerging currencies tracked by Bloomberg, and near a seven-month low.

The pain is evident in raw material prices. The Bloomberg Commodity Index has slumped 4.2% this month, its worst performance since July 2016, while the London Metal Exchange LMEX Index was down 5.8% in the five days through Wednesday.

“If the setback for trade is big enough to slow down the global economy, which is likely to be the case, you’d expect commodity prices to decline or no longer rise,” Cristian Maggio, head of EM strategy at TD Securities in London, said in an interview. Countries closely tied to Beijing through exports of commodities or manufactured goods, such as Russia or Asian economies like South Korea, are particularly vulnerable, he said.

US President Donald Trump’s pledge this week to place tariffs on a further US$200 billion (RM800 billion) of Chinese imports is heaping extra pressure on developing nations at at time when they’re already being roiled by the strength of the dollar and rising US bond yields. The fear is that a trade war would slow growth in China, the biggest consumer of raw materials.

South Korea’s won and Russia’s ruble are both depreciating for a third week, with the former at its weakest against the dollar since mid-November and the latter close to an 18-month low.

South Korea sends almost one-third of its exports to China, which is also Russia’s biggest trading partner, according to data compiled by Bloomberg.

“Small open economies in East Asia, such as Taiwan, Singapore and Malaysia, look most exposed to US tariffs on imports from China due to their role in supply chains,” said William Jackson, a senior economist at Capital Economics Ltd in London. “Likewise Chile, which produces copper used in China’s electronics sector, would also be affected.”

China buys more than half of South Africa’s raw-material exports.

“The rand is caught in the crossfire as we have little to offer,” said Isaah Mhlanga, an economist at FirstRand Bank Ltd in Johannesburg. “Growth is weak, the South African Reserve Bank cut rates in March and remains on hold while other EM central banks bolster their attractiveness by hiking rates. This leaves the rand as vulnerable as taking a naked summer swim with jelly fish.”

While emerging currencies would have been under pressure in the second half of this year anyway because of monetary tightening by the US Federal Reserve (Fed), the pain will be exacerbated for those nations whose economies stutter if the trade spat escalates, according to Societe Generale SA (SocGen).

“EM currencies will depreciate with periodic episodes of stress during the late-cycle Fed tightening phase,” said Jason Daw, a SocGen strategist in Singapore. “It will get really bad if the Fed is hiking when growth is slowing.”