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U.S. Businesses Increasingly Setting Sights on Emerging Markets for Export Growth: HSBC Trade Forecast

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U. S. businesses are increasingly looking to emerging markets for export growth in both the short and long term, according to the latest U.S. HSBC Global Connections Trade Forecast.

Even though U.S. exports are expected to grow by about six percent per year through 2030 and advanced economies will continue to play a dominant role in U.S. trade, the forecast predicts that China and India present the best trade prospects, with U.S. export growth to average nine percent a year to each country through 2030.

Additionally, thirty percent of U.S. business leaders participating in the HSBC Trade Confidence Index Survey (TCI) identified Asia, especially China and India, as the most promising region for business expansion in the next six months, while a quarter favored Latin America, especially Mexico and Brazil. Respondents said the biggest areas of opportunity in Asia in the short term are in construction and manufacturing, while in Latin America they are in wholesale and retail. The index is an international survey of 5,550 small and middle market businesses engaged in cross-border trade including around 250 in the U.S.

“Despite near term challenges, there are clearly significant export opportunities in emerging markets and the good news is U.S. businesses are well positioned to take advantage of them, especially as global trade picks up,” said Steve Bottomley, HSBC Group General Manager, Senior Executive Vice President and Head of Commercial Banking for HSBC in North America. “A highly educated workforce, well-developed production processes, and innovative technology will help U.S. businesses plug into increased trade flows, while the rise of the emerging market consumer is helping to lift demand.”

Globally, trade is expected to grow annually by eight percent beginning in 2016 from 2.5 percent in 2013. Over the longer term, the forecast shows that global merchandise trade will more than triple by 2030 from 2013 levels, as businesses capitalize on the rise of the emerging market consumer and developing markets stabilize their productivity levels for the future.

U.S. to Overtake Germany as top Pharmaceutical Exporter

One U.S. sector that is set to benefit from the increased demand from emerging markets consumers is pharmaceuticals. U.S. pharmaceutical exports are expected to grow by nearly eight percent a year through 2030, outpacing overall export growth for the same period. This will help the U.S. overtake Germany as the leading exporter of pharmaceutical products by 2030 amongst the 25 countries included in the HSBC trade report.

“Rising global demand for better healthcare, especially in emerging markets, is expected to trigger increased spending on healthcare over the next several years,” said Derrick Ragland, Executive Vice President and Head of U.S. Middle Market Corporate Banking, HSBC Bank USA, N.A. “As a global innovator in pharmaceuticals and biologicals, U.S. companies should find it easier to expand into or enter new markets.”

Still, the report notes that healthcare reform and an aging population will drive the U.S. trade deficit for pharmaceuticals goods higher through 2030. Additionally, to remain competitive, U.S. pharmaceutical companies will need to invest in research and design to promote innovation especially as access to increased supplies of generic products from abroad rises and U.S. patents on many major brand products expire.

Unconventional Oil and Gas Products to Lift Energy Exports

Emerging markets will also be a key focus for U.S. energy trade. The forecast shows that rapidly rising production of unconventional oil and gas products domestically will help lift U.S. energy exports by about five percent per year through 2030, while petroleum imports will fall from 12 percent in the near term to seven percent in the long term.

“Emerging markets that don’t have refining capabilities or don’t dispose of energy reserves could represent a major opportunity for U.S. energy exporters,” said HSBC’s Ragland.

Also significant is the impact energy exports will have on domestic job growth. Another report commissioned by HSBC earlier this year showed that chemical plant expansions and liquid natural gas (LNG) terminal upgrades, coupled with the opening of Mexico’s energy industry to foreign investment, will result in a new export boom for Houston and will create more than 55,000 new jobs.

Other key findings from the report include:

  • U.S. TCI dipped to 110 from 115 six months earlier though still well above the neutral benchmark of 100, indicating that the outlook for trade continues to improve although at a slower pace than previously.
  • 60 percent of U.S. business leaders in the TCI survey expect trade flows to increase, down from 66 percent six months earlier.
  • Industrial machinery and transport equipment are the key industries driving U.S. export expansion now and into the future.
  • Top export destinations for the U.S. over the medium term will continue to be Canada, Mexico and China, but Korea and Brazil will displace the slower growing economies of Germany and Japan over the long term to complete the top five.
  • Transport equipment and information, communications and technology equipment will continue to drive U.S. imports.
  • China, India and Vietnam will be the fastest growing suppliers of U.S. imports. Imports from China will grow by an average of seven percent through 2020, accounting for about one-fifth of all U.S. imports.

For a copy of the Global Connections Trade Forecast report and for further information, log onto http://www.globalconnections.hsbc.com/. An infographic which portrays key findings from the latest trade forecast is also available upon request.

Notes to editors:

For updates from the HSBC Press Office, follow us on Twitter: www.twitter.com/HSBC_Press.

HSBC’s Trade Forecast encompasses trade data for 25 countries and territories key to world trade.

About the HSBC Trade Forecast – Modelled by Oxford Economics

Oxford Economics has tailored a unique service for HSBC which forecasts bilateral trade for total exports/imports of goods, based on HSBC’s own analysis and forecasts of the world economy to generate a full bilateral set of trade flows for total imports and exports of goods, and balances between 180 pairs of countries. Oxford Economics produces a global report for HSBC, as well as country specific reports on the following 23 countries: Hong Kong, China, Australia, Indonesia, Malaysia, India, Singapore, Vietnam, Bangladesh, Canada, USA, Brazil, Mexico, Argentina, UK, France, Turkey, Germany, Poland, Ireland, UAE, Saudi Arabia, and Egypt. The analysis also includes trade with Japan and Korea for a total sample of 25 key trading nations.

Oxford Economics employs a global modelling framework that ensures full consistency between all economies, in part driven by trade linkages. The forecasts take into account factors such as the rate of demand growth in the destination market and the exporter’s competitiveness. Exports, imports and trade balances are identified, with both historical estimates and forecasts for the periods 2014-16, 2017-20 and 2021-30. Sectors are classified according to the UN’s Standard International Trade Classifications (SITC) system at the two-digit level and grouped into 30 sector headings. More information about the sector modelling can be found on http://www.globalconnections.hsbc.com/.

HSBC Trade Confidence Index

The HSBC Trade Confidence Index is conducted by TNS on behalf of HSBC in a total of 23 markets, and is the largest trade confidence survey globally. The current survey comprises six-month views of 5,200 exporters, importers and traders from small and mid-market enterprises on: trade volume, buyer and supplier risks, the need for trade finance, access to trade finance and the impact of foreign exchange on their businesses. The fieldwork for the current wave (11) was conducted between May – July 2014 and gauges sentiment and expectations on trade activity and business growth in the next six months.

Sector Focus – Methodology

This report also includes special sections on key industries – agriculture, energy, metals, pharmaceuticals, technology and textiles. Based on the same underlying forecasts used for the existing analysis of trends in bilateral trade flows, the report examines how exports/imports of these groups of products are expected to evolve over time.

HSBC Commercial Banking

For nearly 150 years we have been where the growth is, connecting customers to opportunities. Today, HSBC Commercial Banking serves businesses ranging from small enterprises to large multinationals in over 60 developed and faster-growing markets around the world. Whether it is working capital, trade finance or payments and cash management solutions, we provide the tools and expertise that businesses need to thrive. With a network covering three quarters of global commerce, we make HSBC the world’s leading international trade and business bank. For more information see www.hsbc.com/1/2/business-and-commercial.

About HSBC Bank USA, N.A.

HSBC Bank USA, National Association (HSBC Bank USA, N.A.), with total assets of US $174.6bn as of 30 June 2014 (US GAAP), serves 3 million customers through retail banking and wealth management, commercial banking, private banking, asset management, and global banking and markets segments. It operates more than 240 bank branches throughout the United States. There are over 155 in New York State as well as branches in: California; Connecticut; Delaware; Washington, D.C.; Florida; Maryland; New Jersey; Oregon; Pennsylvania; Virginia; and Washington State. HSBC Bank USA, N.A. is the principal subsidiary of HSBC USA Inc., an indirect, wholly-owned subsidiary of HSBC North America Holdings Inc. HSBC Bank USA, N.A. is a member of the FDIC.

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