China Seen Passing U.S. in Exports as Global Trade Expands


A recent study by global bank HSBC Holdings PLC (NYSE:HBC) indicates that after experiencing a period of economic volatility and lower confidence among importers and exporters, the United States and world trade are expected to grow substantially over the next 15 years.

According to HSBC Trade Connections, a quarterly global trade forecast, U.S. trade is expected to reach $4.39 trillion, an increase of 62.3% from last year’s $3.04 trillion, by 2025 as American goods such as medical equipment and high-end manufactured products are sent to countries with emerging economies.

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Global trade is expected to grow by $1 trillion each year until 2015, a 2% annual growth. The study projects global trade to rise 73% with trade volumes reaching $43.6 trillion by 2025. Companies will increase trade activity by a combined 3.9% in order to achieve this projected growth.

Despite an increase in total trade value and an annualized growth rate of 7.2% during the next two years, the United States’ share of world trade is projected to fall to 9% by 2025 from the 11.2% recorded in 2010. Meanwhile, China will account for 13% of world trade to pass the    U.S. as the top exporting nation.

“The United States will still see a very significant growth rate when it drops to number two. China is growing faster, but the United States still has a massive role to play in world trade,” said Mark Watkinson, the head of commercial banking for HSBC in North America.

In the midst of economic uncertainty, U.S. trade growth has stalled recently and is expected to fall from last year’s 13.4% growth. This period of volatility has left traders less confident about economic prospects, as HSBC’s Trade Confidence Index fell to its lowest point since the first survey was conducted in 2009. The most recent survey, which was conducted between July and September, revealed that only 49% of U.S. traders anticipate an increase in trade volumes in the next six months, a 13% drop from the first half of 2011.

The index also reflected concerns in the global economy, as the percentage of U.S. businesses that felt the global economy will decline in the next six months rose to 49% from the 19% recorded in the first half of the year. Global businesses felt differently, as 38% of respondents said the global economy will weaken.

Despite a decrease in overall global trade confidence, 84% of respondents anticipate international trade levels to increase or remain the same over the next six months, an indication that businesses see greater opportunities for growth through emerging markets. Businesses in Egypt, Indonesia, Saudi Arabia and the United Arab Emirates reported greater trade confidence in the first half of 2011.

Watkinson added that these growing international markets will provide greater export opportunities for U.S. businesses, changing the way these businesses approach trade.

“There’s going to be a renaissance in U.S. export growth. Traditionally, American businesses look to the domestic market, but more and more they will look for growth opportunities abroad,” said Watkinson, who noted the emergence of Brazil, India and China in the global market.

Out of those countries with billions of dollars in measurable trade flow volumes, Vietnam is the fastest growing U.S. trading partner. HSBC’s confidence index found that Latin America, Greater China and Canada continue to be the largest trading partners for U.S. businesses, and surveyed traders expect this to remain the case during the next six months. Those same traders identified Latin America and China as the best opportunities for short-term business growth.

For international businesses, the study provides a positive outlook for future business opportunities and new trade corridors.

“Many people who I have spoken to said, ‘Yeah, we know that.’ These statistics reaffirm what they have seen,” said Watkinson, who met with business leaders at an event for HSBC’s “Business without Borders” initiative. “The rise of emerging markets is going to be a major feature of the world economy.”

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