He adds:

A positive in this situation may be that many emerging markets economies are developing consumption-based economies that will insulate them from the worst effect of protectionism.

Nevertheless, many stocks have already been discounted in the expectation of trouble ahead.

In 2016, both the Obama Administration and the European Union put tariffs on basic steel product imports from China. Last year, Brazil imposed a tariff and a quota on US ethanol imports. And on it goes.

This is a long-running and complicated global situation that risks becoming a quagmire. It leads to very complicated discussions about local costs, local content and where you draw the line between legitimate trade and state subsidised trade.

The World Trade Organisation has not made any progress with its trade liberalisation agenda since the Doha Development Round, which was launched in 2001 and eventually broke down in 2008.

When it comes to investing in emerging markets, an economy’s percentage of external trade to total GDP is key to its sensitivity to this issue. This is often greater than at first perceived, as value chains and international supply chains complicate the picture.

Nonetheless, in general terms, the most exposed emerging market economies would be China, Korea and Mexico.

The impact on equity markets often depends on “what’s already discounted” in the price. Investors are already discounting a fair degree of trouble in such stocks as Korean auto plays Hyundai and Kia, steel plays such as Posco, and Mexican consumer staples with big US franchises such as Gruma.

But something to keep in mind when investing in emerging markets is that issues of corruption, governance, transparency and protectionism are more often encountered than when investing in developed markets.

The issue is whether that discount is widening more or contracting, as the probability of further protectionism increases or abates.

In addition, there is a question of the degree to which a country’s domestic policy reforms may materially influence its vulnerability to protectionism. A move towards a greater domestic demand reforms versus the old “Asian Tiger” export model is a plus.

India and China both fall into this category. Both have material and strong government-backed programs to enhance the pivot away from a primarily export based model.

Investing alongside these reform programmes offers an investor some relative downside protection.

For example, there are three or four excellent Chinese plays that are participating in the country’s environmental reforms. Companies such as the environmental management group China Everbright International are regularly in and out of our portfolio.

In addition, hopes are high that Saudi Arabia’s Saudi 2030 Vision will make a difference. The country, which is bidding for inclusion in the MSCI Emerging Markets Index, is looking at diversification into high technology.

One notable exception is Russia, which has failed to move away from hydrocarbons to a high value-added diversified economy.

Is the current situation a forerunner to broader trade barriers going up? I think we need to wait and see. NAFTA may fall to the politics. Watch out for Brexit and the new trade deal the UK will have to negotiate with the EU.

And if the Chinese are going to try and deleverage their excess credit bubble, it will lead to lower domestic demand and excess product for export. China will cut industrial production but it won’t happen until 2019/20. There is a risk of dumping and of retaliation.

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