Businesses Plan to Capitalise on Disruption of Global Trade

Politicians may be reshaping global supply chains, but businesses are still confident they will find growth in new markets, according to a new HSBC report.

The latest HSBC Navigator: Now, next and how survey of more than 9,100 companies in 35 countries and territories finds that 47% are more optimistic now than in 2018, with 79% expecting their sales to rise over the next 12 months. Four in five (81%) are positive in their outlook for cross-border commerce, up four percentage points on last year, even as 65% think governments are adopting increasingly protectionist trade policies.

International expansion is seen as the top growth driver by bullish firms (38%) as well as being a defensive reaction to new threats (29%). Entering new markets is the joint top change businesses plan to make to their supply chains over the next three years, up five points year-on-year to 28% of respondents, alongside increasing use of digital technology.

Companies are responding to changes in the political landscape, whether they be new tariffs that disrupt supply chains or trade agreements that smooth a path to new markets. They are investing in digitisation to cut costs and looking to seize market share as a means to protect and grow their business. Whether the motivation is entrepreneurism or resilience, by keeping an eye on the long-term trends reshaping the competitive environment, companies can position themselves to capture opportunities.

Lawmakers in a number of markets have enacted significant trade control measures, including well-publicised tariffs, since the 2018 Navigator: Now, next and how survey. However, efforts have also been made to further liberalise trade, particularly in Asia and Europe[1]. HSBC forecasts that the global economy will expand by 2.5% in 2020 following 2.6% growth this year.

The 2019 survey finds that only 8% of companies operating domestically today plan on staying that way for the next three to five years, and that views on international trade and protectionism diverge significantly at a market level – particularly within Asia.

Firms in Indonesia, Vietnam and India are the most likely to say they see rising levels of protectionism, but are also overwhelmingly positive about their prospects for international trade and business growth in the next 12 months. Conversely, companies in Asian economies with significant trade dependencies on the US and mainland China are far less optimistic on growth (South Korea 64% positive, Japan 57%, Hong Kong 52%).

Confidence remains strong in both mainland China (86% of companies) and the US (80%), where rate cuts and deep domestic markets may be helping to insulate companies from bilateral trade tensions. Continuing a trend seen in 2018’s survey, most markets are planning to boost their intra-regional trade in the coming three to five years. Europe looks set to become a bright spot in inter-regional trade though, with 39% of respondents naming a European market in their top three for business expansion in the next three to five years, up six points from a year ago.

Businesses are taking different approaches to overcome protectionist policies and manage geopolitical pressures. These strategies include cutting costs, entering joint ventures or partnerships with local companies, and selling more online.