HSBC Highlights Corporate Optimism’s Resilience Over Global Trade Uncertainty

Protectionism has cast a shadow of uncertainty over global traders, and North America’s trade relationships are in flux.

Early in President Donald Trump’s presidency, the U.S. withdrew from the Trans-Pacific Partnership. One year later, the nation’s participation in the North American Free Trade Agreement (NAFTA) is also changing as the U.S., Canada and Mexico engage in negotiations that are expected to continue through April, according to Bloomberg reports this week.

Despite ongoing change and uncertainty, however, new analysis from HSBC finds corporates across North America remain confident in their future global trading operations.

HSBC published its “Navigator: Now, next and how for business” report on Wednesday (March 21), exploring how corporates are navigating the current global trade climate as relationships are revised and guidelines are redrawn.

It’s clear from the report that protectionism has forced corporations across North America to adjust their trade strategies. More than 60 percent of corporate executives surveyed for the report said they believe governments are indeed taking a more protectionist stance in an effort to promote domestic businesses. But the survey, which was taken by 6,000 executives at global organizations, also found that more than three-quarters of companies remain optimistic about the future of international operations, despite rising protectionism.

In an interview with Global Trade Review, HSBC global head of trade finance propositions Vinay Mendonca said this ongoing confidence in global trade is fueling trade and supply chain finance and management technologies.

“The way you finance trade might change in the future,” he told the publication. “You now have situations where the supply chain is being completely transformed on the back of technology. So we need to understand, for example, how we support supply chains leveraging 3D printing and finance underlying data of designs.

“We’re seeing the need to evolve,” he added. “But there is still a lot of supply chain finance demand out there in the traditional sense. Not everybody will transform at the same pace.”

Reliance on NAFTA Remains Strong

As corporate financial services catches up to changing demands and technologies of global trade, NAFTA remains a reliable path to international expansion for businesses surveyed by HSBC.

About half of executives from the U.S., Canada and Mexico believe the outcome of NAFTA renegotiations will be positive over the next two years, HSBC found.

“In spite of the threat of new trade barriers, we expect growth in cross-border business to continue, especially among our North American neighbors,” reflected HSBC USA head of commercial banking, Wyatt Crowell, in a statement. “We’re seeing a lot of optimism from U.S. clients right now stemming from factors like deregulation, lower taxes, a somewhat weaker U.S. dollar, climbing energy prices and a rise in global economic development.”

Less than a tenth of companies in the U.S. have a negative outlook on NAFTA, and expect a finalized agreement to inhibit their growth (though that portion is slightly larger in Mexico, at 16 percent, and Canada, at 13 percent).

Further, companies remain more confident about NAFTA than they do with trade agreements elsewhere: Mexican firms, for instance, are less positive about the Pacific Alliance trade partnership, and Canadian firms are less positive about CETA and CPTPP than they are about NAFTA.

Still, executives remain upbeat about their international operations overall.

Eighty-seven percent of Mexican professionals, 77 percent of U.S. professionals and 70 percent of Canadian professionals say they are optimistic about increasing cross-border trade volume over the next year.

For the U.S., that primarily means trade with Canada and Mexico, accounting for a combined 39 percent of trade volume. Japan, meanwhile, accounts for 11 percent. Mexican businesses’ next-largest trade target after Canada and the U.S. is Argentina, while Canada’s next-largest trade target after the U.S. and Mexico is China.

“NAFTA has significantly benefitted Canada, Mexico and the United States,” said HSBC Bank Canada head of commercial banking, Linda Seymour. “It has facilitated increased trade, improved customer choice, allowed for the provision of more services and fostered growth and greater cooperation among government policymakers and businesses in all three countries.”

“NAFTA has become a $1.2 trillion corridor for continental trade and investment, and represents a good opportunity [for] business in the three countries to grow and expand,” said HSBC Latin America and Mexico head of commercial banking, Juan Marotta, in another statement.