At HSBC’s annual Trade Economist Seminar held in Hong Kong, Douglas Lippoldt, Chief Trade Economist, Global Research, HSBC, and Robert Olson, Senior Manager in Deloitte’s Global Trade Advisory Practice in Hong Kong, held a lively discussion on the overall global trade sentiment. They also focused on the pressing issue of the trade disputes between China and the United States, as well as the effect of those disputes on the overall outlook on trade in the Asia Pacific region.

    Lippoldt and Olson agreed on there being a cautious optimism on the trade outlook in the Asia Pacific region, despite concerns over rising protectionism and looming tariffs. But they also emphasised that the current trade situation is fragile and vulnerable to sudden shifts in the conditions for trade, highlighting the need for businesses to stay alert to the ongoing trade developments and be agile and adaptable.

    Strong Trade Potential on the Horizon

    Although the escalating trade war continues to worry businesses, 4 out of 5 firms expect continued trade growth in 2018, according to the HSBC Navigator, which presented a global business survey that polled over 6,000 business representatives globally as of January. Asia-Pacific businesses showed the most optimism, with 82 per cent of respondents expecting trade growth in 2018. Additionally, North America remains the most cited target market for growth.1

    This optimism is largely driven by the enormous growth potential of the emerging markets around the world. “When you look at the assets that are available including land, labour and capital in the emerging markets, and when you consider EM demographics and prospects for technological catch up, it is clear that we could see a strong acceleration in growth, if policy permits this to emerge,” said Lippoldt.

    The emerging market middle class is forecast to expand greatly. By 2050, there is expected to be an increase of 2.6 billion members of the middle class across 17 emerging markets. This rising middle class represents an important source of future demand for traded goods and services, including products from the emerging markets.2

    Regional Initiatives and Free Trade Agreements Fuel Optimism

    Given the growth potential of emerging markets and the continuing impediments to trade along many corridors, it is clear that trade liberalisation and facilitation have an important economic role to play. In Asia, action on this front is underway via measures such as the Belt and Road Initiative and ASEAN 2025, new regional Free Trade Agreements (FTAs) including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, now undergoing ratification) and the Regional Comprehensive Economic Partnership (RCEP, under negotiation), and the growing number of bilateral accords (eg Sri Lanka and Singapore have just completed a new accord).

    “The Belt and Road Initiative, if fully implemented, could mobilise USD1.4 trillion worth of infrastructure investment or more, closing gaps and boosting capacity. And, the BRI also aims to improve customs administration. Through such actions the BRI could ultimately boost global trade by 5 per cent according to one estimate,”3 said Lippoldt.

    Furthermore, while the CPTPP and the RCEP are making progress, there are also many other FTAs under negotiation in the region. For example, China is negotiating 8 new bilateral accords.4 The European Union has three new deals pending with Asian partners and several others under negotiation.5

    “FTAs help to increase policy stability, limiting the ability of governments to intervene arbitrarily in trade,” Lippoldt added. Therefore, the increasing trend of countries seeking to negotiate free trade agreements should contribute positively to trade sentiment.

    Uncertainty amid trade tensions

    Although economic fundamentals point to a positive long-term outlook for trade, the current policy environment is volatile along some key trade corridors. US-China trade relations are tense as the US has moved to impose tariffs and quotas on an increasing range of imports. China has underscored its willingness to pursue dialogue with the US, but it has also signalled its intent to respond proportionately to US actions.

    Businesses Pursue Growth Drivers

    The first sets of USD34 billion in tariffs implemented by both sides has rattled markets. However, there are bright spots for businesses in the current trade landscape. Promising technology applications are being implemented, such as HSBC’s recent first live pilot trade finance transaction using blockchain, for a shipment of soybeans from Argentina to Malaysia. “This blockchain transaction radically improves the speed and efficiency of trade transactions by removing paper and bringing all participants to a single digital network. The total transaction time was reduced significantly from the typical 5-10 days to within 24 hours. For our clients, this provides a trade finance solution that is simpler, faster, more transparent and even more secure – this is an extremely positive development,” said Ajay Sharma, Regional Head of Global Trade and Receivables Finance, Asia Pacific, HSBC, in his welcome remarks. Furthermore, businesses are taking proactive measures to manage the effects of the possible implementation of further tariffs, demonstrating the willingness to find solutions. “One of the things you can be doing right now as a company is looking at your supply chains, looking at your import data for potentially tariffed goods and seeking exclusion from tariffs through various mechanisms,” commented Olson.

    Positivity despite trade tensions

    Despite the trade policy turbulence along certain corridors, there is a cautious optimism elsewhere largely driven by several major factors. First, new technologies will lead to greater ease of trade and business when implemented. Second, good prospects for future trade are driven by the vast potential in the rising middle class and rapid development of the emerging markets. Finally, cooperation on regional initiatives and a number of Free Trade Agreements will facilitate trade and investment along trade corridors within Asia and between Asian nations and more distant partners.

    Together, these factors show that while the trade policy landscape is at risk in some areas, there remains strong underlying potential for continued trade recovery and growth in the period ahead.


    1 HSBC (2018), Navigating the changing global trade policy environment: Hong Kong
    2 UN, World Bank; HSBC, Consumer in 2050, 15 October 2012. HSBC Global Connections, December 2016, and HSBC Trade Navigator,, March 2018.
    3 F. Zhai, Journal of Asian Economics, 2018.
    4 MOFCOM, June 2018,
    5 WTO; HSBC, TRADE POLICY IN 2018, 10 January 2018, and the EU:

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