When global uncertainty increases, emerging markets are typically the most exposed. Historically, tighter US monetary policy has led to capital outflows, currency depreciation, and tightening financial conditions in emerging markets. This column examines how domestic vulnerabilities shape the transmission of US monetary tightening across countries. It shows that many emerging markets avoided widespread financial crises over the 2022-2023 tightening cycle due to improved monetary policy credibility and reduced foreign-exchange vulnerabilities. In a world of rising uncertainty, stronger domestic institutions are among the most effective forms of economic insurance.

In today’s interconnected global economy, geopolitical shocks cascade through trade, production, and financial networks that were built for efficiency, not resilience. As disruptions hit critical supply chains, temporary price spikes can evolve into sustained inflationary pressures, raising the risk of stagflation.

While many Americans associate AI with mass layoffs and less satisfying work, an AI future that puts people first and supports workers is possible.