Market Overview

Amidst Global Trade Uncertainty, HSBC Finds that North American Businesses Look to Neighbors for Growth

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Preliminary USMCA Deal Likely to Support Regional Growth
Opportunities Identified by Businesses in the US, Mexico and Canada

Despite concerns about protectionist measures, businesses in the United
States, Mexico and Canada expressed a high degree of confidence about
international trade opportunities, according to HSBC's latest Navigator
Survey. Results show that firms in North America exhibited more interest
in doing business within the region, likely due to ongoing uncertainty
regarding trade negotiations happening around the globe.

"Businesses are clearly finding ways to move from uncertainty to
growth," said Jaron Campbell, US Head of International Subsidiary
Banking, HSBC Commercial Banking. "Despite a number of global
developments, we've observed a renewed sense of energy across all
sectors and industries around doing business within the North America
region."

For example, firms in all three countries ranked their regional partners
as their top two markets for growth:

  • US firms identified Canada (28%) and Mexico (13%) as their top markets
    for growth, led by an eight percentage point increase in interest for
    Canada
  • Mexican firms are looking to the US (45%) and Canada (34%) for growth
    as evidenced by strong increases in interest for both markets
  • Canadian firms see growth opportunities in the US (46%) and Mexico
    (15%), highlighted by a 10 percentage point increase in interest for
    the US

Pivoting to intra-regional rather than inter-regional trading
opportunities is also observed in other regions. European companies
citing Asia as a top market for growth dropped from 26% in the first
quarter to 13% now, North American firms citing Asia fell from 33% to
15%, and Asian companies citing North America slipped from 29% to 21%.
At the same time, more Asia-Pacific companies are looking at China
specifically as a future growth market, a four percentage point increase
to 16%.

Although fielded before the preliminary framework of the rebranded
United States-Mexico-Canada Trade Agreement (USMCA), survey data show
that in both the US and Canada, nearly half (46%) of businesses felt
that NAFTA will help their business in the next three years. Businesses
in Mexico were more optimistic with 58% of those surveyed reporting it
will help their business in the next three years. If approved, USMCA
will likely strengthen the desire to capitalize on the growth
opportunities previously identified within the region.

Key Findings for the US

  • Nearly four out of five (79%) are confident that their company will
    succeed in the current international trade environment based on global
    economic growth (31%), strong domestic growth (26%) and interest rates
    (25%)
  • Almost two-thirds (60%) of US companies with a negative outlook cite
    tariffs as the key reason
  • US trade uncertainty with China is a second key concern for more than
    a third (36%) of US companies
  • More than two thirds (69%) of US businesses feel that governments are
    becoming more protective of their domestic businesses, a nine
    percentage point increase since 2017, higher than the global average
    of 63%

Key Findings for Mexico

  • The vast majority of respondents (90%) are confident about their
    company's future in the international trade environment due to
    consumer confidence (43%), buyer/supplier relationships (33%) and new
    technologies (30%)
  • Looking ahead, a third of Mexican goods exporters are planning to
    diversify their markets – almost 10 percentage points more than the
    global average
  • Plans for internationalization remain a key focus for company
    direction, particularly for those with less than 50% of their business
    abroad

Key Findings for Canada

  • More Canadian firms expect US-China trade uncertainty to have a
    positive near-term impact on their business (30%) than expect a
    negative effect (25%)
  • Over two-thirds (68%) of Canadian firms believe governments in their
    key trading partners are becoming more protective of domestic
    businesses – around five percentage points higher than the global
    average (63%)
  • Many Canadian firms also intend to invest in up-skilling their
    workforces to focus on key skills development and productivity growth,
    perhaps in light of historically low unemployment and a tight labor
    market

Note to editors:

HSBC Navigator: Now, next and how for business

HSBC's Navigator report comprises a global survey gauging business
sentiment and expectations on trade activity and business growth from
8,650 decision-makers in 34 markets. Research was conducted by Kantar
TNS for HSBC between August and September 2018. HSBC's Navigator helps
businesses capitalise on new opportunities and make informed decisions
for the future by understanding the outlook for international trade.

The full report can be accessed here: www.business.hsbc.com/trade-navigator

HSBC Holdings plc

HSBC Holdings plc, the parent company of the HSBC Group, is
headquartered in London. The Group serves customers worldwide from
around 3,800 offices in 66 countries and territories in Europe, Asia,
North and Latin America, and the Middle East and North Africa. With
assets of US$2,603bn at 30 September 2018, HSBC is one of the world's
largest banking and financial services organisations.

HSBC Commercial Banking

For over 150 years we have been where the growth is, connecting
customers to opportunities. Today, HSBC Commercial Banking serves around
1.7 million customers across 53 markets, ranging from small enterprises
focused primarily on their home markets through to corporates operating
across borders. Whether it is working capital, term loans, trade finance
or payments and cash management solutions, we provide the tools and
expertise that businesses need to thrive. As the cornerstone of the HSBC
Group, we give businesses access to a geographic network covering more
than 90% of global trade and capital flows.

For more information visit: www.hsbc.com/about-hsbc/structure-and-network/commercial-banking.

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