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Trade in 2024: Proceed with caution

  • Global trade growth is set to pick up modestly this year…
  • …but geopolitical conflicts, uncertainty amid elections, rising protectionism, and climate issues pose downside risks…
  • …while supply chains are set to continue evolving amid some early signs of reshoring

Is the worst over?

After a dismal year of growth, global trade is set to rebound modestly in 2024. HSBC economists expect world exports of goods and services to grow y-o-y by 1.8% in 2024 and 3.4% in 2025, following an estimated annual contraction of 0.7% last year. Inventory replenishment by businesses following a wave of destocking and/or a sustained pick-up in demand could help boost world trade, particularly in the second half of this year, and in turn help to buoy broader global economic prospects.

HSBC forecast for y-o-y growth in world exports (goods and services) in 2024
HSBC forecast for y-o-y growth in world exports (goods and services) in 2025

But we must proceed with caution:

  • Higher interest rates may continue to limit consumer spending on goods and impact borrowing costs for businesses, while uncertainty remains around the extent to which Chinese demand, which is key to supporting intra-Asia trade, accelerates.
  • An escalation in geopolitical conflicts in the Middle East risks disrupting Red Sea trade further and exacerbating shipping delays caused by drought restrictions in the Panama Canal.
  • Trade uncertainty could spike amid a swathe of elections this year: for example, former President Trump has proposed 10% tariffs on all US imports as he seeks office again.
  • Changes to industrial policy in Western economies could lead to more trade protectionist actions, and EU-China tensions risk heightening on the back of the bloc’s investigation into imports of subsidised Chinese electric vehicles.

On the plus side, however, the UK and India are looking to clinch a free trade deal ahead of elections in both economies this year, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) may take effect for the UK in the second half of the year. The UK is the first economy outside the Pacific Basin to join CPTPP, and so this would represent an expansion in the pact’s reach.

However, we also don’t know what we don’t know. Time and time again we’ve seen how “grey swan” events (that is, events that are possible and knowable but considered unlikely) have upended supply chains. While it is difficult to predict exactly what the next big trade risk will be, businesses are navigating a highly uncertain trade environment. And the need to build resilient supply chains has never been more apparent.

The ongoing evolution of supply chains is set to continue.

As a result, the ongoing evolution of supply chains is set to continue this year. While data on trade and FDI into Mexico and ASEAN suggest some degree of reshoring is starting to occur, mainland China remains the top import source for around 70 economies around the world. And it could take time to see these shifts fully bear out at the macro level.

Either way, 2024 is certainly teeing up to be another eventful (and politically charged) year for global trade.

Would you like to find out more? Shanella will be answering questions on the outlook for trade in a Live Insights event, hosted on our LinkedIn channel on 27 February 2024. Register now to join the audience and ask your question.

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