Demand from emerging economies such as China and India will help drive U.S. export growth in the next two decades, HSBC predicts in its latest trade forecast.

Emerging Markets Offer Best Prospects for US Export Growth: HSBC

Sept. 16, 2014
Where should U.S. exporters look for the best growth opportunities over the next two decades?

Asia and Latin America present the best opportunities for U.S. exporters seeking growth as global trade picks up, according to the latest trade forecast from HSBC Bank USA. Industrial machinery and transport equipment will be key industries driving trade expansion.

U.S. exports are expected to grow 6% a year through 2030, HSBC said in its Global Connection Trade Forecast, but the bank said exports to both China and India should average 9% annual growth over that period.

Thirty percent of U.S. business leaders polled by HSBC in its Trade Confidence Index (TCI) Survey identified Asia, particularly China and India, as the most promising region for business growth in the coming six months. Another 25% said Latin America, especially Mexico and Brazil, was the most promising export destination. While business leaders remained bullish about trade prospects, the TCI fell from 115 six months ago to 110 (figures over 100 represent expansion in trade).

Business leaders said manufacturing and construction were the biggest opportunities in Asia, while wholesale and retail were prime targets in Latin America.

While Canada, Mexico and China will remain the top export destinations for U.S. businesses, HSBC said Brazil and Korea will supplant Japan and Germany over the next couple decades to round out the top five export markets.

As for imports, China, India and Vietnam will be the fastest growing suppliers of U.S. imports, HSBC found. Chinese imports will grow an average of 7% annually through 2020 and account for 20% of total U.S. imports.

Respondents were less enthusiastic about prospects for increased trade with Europe than in the previous survey. While the European economy is showing signs of recovery, HSBC said, the pessimism might reflect concerns about tensions between Russia and Ukraine.

HSBC officials said middle-class consumers in emerging markets would help lift demand for exports from the U.S. and other developed nations. From a 2.5% growth rate in 2013, HSBC forecast that trade would grow by 8% beginning in 2016. Over the longer term, the bank forecast, global merchandise trade will more than triple in 2013 from levels in 2013.

The U.S. pharmaceutical industry will be a prime beneficiary of export growth, HSBC stated. The bank said pharmaceutical exports would grow nearly 8% a year through 2030, by which time the U.S. would pass Germany as the leading exporter of pharmaceuticals among the 25 nations included in its 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, an executive vice president at HSBC Bank USA. “As a global innovator in pharmaceuticals and biologicals, U.S. companies should find it easier to expand into or enter new markets.”

But with patents expiring on many major drug products, the bank warned, U.S. drug makers will need to “invest significantly in R&D to promote innovation and maintain profitability.”

Energy Exports Will Drive US Job Growth

Energy exports from the U.S. will rise about 5% a year through 2030, HSBC predicted, driven by the rise in unconventional oil and gas products. At the same time, the bank said petroleum imports to the U.S. will fall from 12% in the near term to 7% over 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 Ragland.

Earlier this year, HSBC commissioned a study which predicted that energy exports could produce more than 55,000 new jobs in the U.S. The study found that chemical plant expansions and liquid natural gas terminal upgrades, along with the opening of Mexico’s energy sector to foreign investment, would lead to an export boom from the U.S.

Respondents told HSBC the costs of shipping, logistics and storage, government regulation and insufficient margins were among the main factors inhibiting stronger trade growth.

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