EMERGING MARKETS-Stocks, FX stall as Trump prepares sweeping tariffs; South Africa budget in focus

By Johann M Cherian

April 2 (Reuters) - Investors avoided riskier emerging markets on Wednesday, as they braced for details on the scope of highly anticipated reciprocal U.S. tariffs, while South African assets slipped on signs that there was not enough political support to pass a budget bill.

MSCI's index tracking equities in developing markets .MSCIEF and their currencies .MIEM00000CUS was flat. U.S. President Donald Trump is expected to impose a sweeping set of trade levies on the country's trading partners at 2000 GMT, which are expected to take effect immediately.

Trade-reliant developing economies that have a significant trade deficit with the U.S. are likely to be in the crossfire, including China, Mexico, Vietnam, Taiwan, South Korea, Thailand, India and South Africa.

Trump's move is likely to further escalate a global trade war that could also hurt global economic growth, although some analysts have pointed out that the silver lining could be some clarity for businesses that have avoided new investments due to policy uncertainty.

Despite the apprehension, MSCI's indexes finished the previous quarter on an upbeat note as investors scooped up beaten down emerging market assets and anticipated that governments of developing economies could strive to reach trade deals with the U.S.

"The key challenge remains balancing these (negotiation) efforts with domestic policy priorities, particularly in politically sensitive industries," said Cornelius Coetzee, country director for South Africa at Verto.

Israel's shekel ILS= inched up 0.2% and local equities .TA125 added 0.9% after the country cancelled its remaining tariffs on imports from the United States.

South Africa, which has a preferential trade deal with the U.S., is also seeking a meeting with U.S. authorities on auto tariffs that are expected to take effect on Thursday.

The rand ZAR= weakened 0.5%, while equities .JALSH and the benchmark bond ZAR2030= were marginally lower as an opposition party sought to block lawmakers from voting on the budget bill, while tensions were also high between the government's coalition partners.

"A lack of compromise on key budgetary issues increases the risk of credit rating downgrades, higher borrowing costs, and capital outflows, all of which could weigh on the rand and inflation," Coetzee added.

In eastern and central Europe, Poland's zloty EURPLN= inched up 0.3% against the euro ahead of a central bank monetary policy decision, with analysts expecting no change to interest rates.

Turkey's lira TRYTOM=D4 was little changed and the local stocks index .XU100 lost 0.5%. Political uncertainty prevailed following the detention of Istanbul Mayor Ekrem Imamoglu, President Tayyip Erdogan's main rival, last month.

Russia's rouble RUB= firmed 0.3% against the dollar. Senior Trump administration officials see the likelihood that the U.S. will be unable to secure an imminent peace deal between Ukraine and Russia.