Citi's latest report highlights a cautious optimism for emerging markets (EM) as President Trump's second term begins without immediate tariff impositions. The absence of tariffs on Day 1 offers a "window for the dollar to retrace," though the unwind has been modest, with the dollar still tracking the 10-year rate differential more closely than the 2-year, according to Citi analysts. This development provides China an opportunity to negotiate and implement policy supports, which could significantly impact EM economies. "What China chooses will matter for EM," Citi notes, emphasizing the importance of China's policy decisions in shaping EM resilience. The report also points out that while tariff risks have not been fully priced in, the market's focus is shifting towards relative growth prospects, as reflected in 10-year rate differentials. This shift suggests a less destabilizing scenario for EM, at least until further policy announcements are made.