When the winds are strong, even turkeys fly.

According to a Wall Street adage, when the winds are strong, even turkeys fly. This adage might have particular relevance for today’s emerging market economic outlook at a time when many years of ultra-easy global liquidity conditions are coming to an end.

During the years when the world’s major central banks maintained extraordinarily low interest rates and expanded the combined size of their balance sheets by some US$10 trillion, the emerging market economies had little difficulty in tapping the international capital market. Indeed, emerging market corporates managed to increase their borrowing by some US$15 trillion between 2008 and 2017. And they did so at interest rates that did not nearly compensate investors for the default risk associated with this borrowing.

Equally striking is the fact that last year a country with as checkered a default record as Argentina could issue a 100-year bond on relatively favorable terms. Or that investors eagerly snapped up sovereign bond issues by countries with as dubious economic and political fundamentals as Iraq, Kenya, Mongolia, and Tajikistan.

Sadly, for the emerging market economies the strong winds of very easy global liquidity conditions are now rapidly dying down. The Federal Reserve is now well on its way to normalizing interest rates and reducing the size of its balance sheet. At the same time, the European Central Bank has announced that it will stop its quantitative easing program by year-end.

Further clouding the emerging market outlook is the pursuit of an expansive fiscal policy by the Trump Administration at this late stage in the U.S. economic cycle. By putting upward pressure on U.S. interest rates and the U.S. dollar, that fiscal policy reinforces the capital flow reversal from the emerging markets already being induced by the more attractive interest now on offer on U.S. Treasury issues.

The last thing that the emerging market economies now need is a slowing in the Chinese economy and a depreciation of its currency. Not only would that crimp demand for international commodities, which is the lifeblood of many emerging market economies. It would also heighten the risk that China and the United States would drift further towards a full-scale trade war that might derail the global economic recovery.

Yet it is difficult to see how China can succeed in avoiding a slowing in its economy as it tries to address its own domestic credit bubble of epic proportions. And if the Chinese economy does slow, it is all too likely that the Chinese authorities will be tempted to allow their currency to weaken to provide some support to the economy.

The emerging market economies’ immediate daunting challenges have clear implications for both the U.S. and the global economic outlook. After all, the emerging market economies now account for over 50 percent of the global economy and are hugely indebted to the global financial system. This has to make one think that the U.S. administration is ignoring at its peril the adverse impact of its budget and America First trade policies on the emerging market economies.