(Bloomberg) — Mexico led a currency meltdown while China spurred an equity selloff as Donald Trump’s election sparked a resurgence of the “Trump Trade” and sent emerging markets sinking.

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The peso, often seen as the currency most vulnerable to Trump’s trade policies, tumbled as much as 3.5%, helping to set up the emerging-market currency gauge for its worst day since February 2023. China’s stock indexes in Hong Kong slid more than 2.5% as traders priced in punitive tariffs for the world’s second-biggest economy.

Emerging markets were hit hard early Wednesday by the so-called Trump trade as they stand to lose from his “America first” economic priorities, including restrictions on imports and immigration. It was Trump’s trade war against China in 2018, during his first term, that halted an EM equity rally and sparked an underperformance relative to the US that continues to this day. This time around, Trump has also pointed to an expansive fiscal policy that’s seen as inflationary and could undermine developing nations’ capacity to cut borrowing costs.

“A Trump presidency will implement harsher and broader tariffs than during the last Trump administration,” with China targeted more than other countries, said Rajeev De Mello, chief investment officer at Gama Asset Management. “An expansionary fiscal policy will lead to higher bond yields, especially for bonds with longer maturities, resulting in a double whammy for the emerging markets through a stronger US dollar and higher US yields.”

Traders had been preparing for a Trump victory in recent weeks and volatility in the peso soared. The Republican’s proposals would hit Mexico — the largest trade partner with the US — particularly hard. On the campaign trail, Trump said automakers building plants in Mexico are a “serious threat” to the US.

The currency selloff was widespread as Trump cruised to victory, with the MSCI EM Currency Index dropping as much as 0.8%. It’s less than 1% away from erasing its 2024 gains.

Eastern European currencies posted some of the biggest losses on Wednesday amid concern that Europe’s growth and monetary policy may be constrained, while the continent’s defense expenditure may go up.

Trump’s “trade policies would have particularly negative consequences for Mexico, but also for the euro zone and closely correlated with it the Central and Eastern European region,” said Piotr Matys, a senior FX analyst at In Touch Capital Markets.

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