IN BRIEF

  • The United States will continue to see strong growth in trade as it is well-positioned to serve both emerging markets and advanced economies, and it stands to benefit greatly from fast-growing sourcing economies.
  • Although trade represents a relatively small share of the economy, the United States has much to gain from increased trade liberalisation. Strong growth in Asian economies, in particular, offers a major opportunity for US exporters.
  • An ongoing focus on developing a high-skilled labour force and promoting research and development, combined with trade liberalisation, will help to lift prospects for increased US trade in the Information and Communications Technologies (ICT) sectors.

Although the United States remains a relatively closed economy, it is moving towards greater trade liberalisation through bilateral, regional and multilateral trade agreements. Despite being the largest economy in the world, the United States has much to gain from increased trade flows. A gradual reorientation of trade patterns away from slower-growing advanced economies towards faster-growing emerging markets would bode well for the economy as a whole.

LONG-TERM OUTLOOK

Economic Outlook – The US economic outlook remains firm as solid job growth, low inflation and strong real disposable income growth all support household spending. And with its highly-educated labour force, solid institutions, innovative technology and efficient production processes, the US is well-positioned to benefit from rising world trade.

The World Bank’s ‘Doing Business’ report for 2015 places the United States at 16th in its ranking of 189 economies on the ease of trading across borders, reflecting its fairly modest levels of bureaucracy and relatively rapid pace of transactions.

While the sharp US dollar appreciation over the past nine months represents a near-term constraint for US exporters (as well as for businesses with indirect export exposure), rising world economic activity, the twin (trade and fiscal) deficits in the US and a realignment of monetary policies globally will result in a gradually weakening US dollar in the years leading up to 2030. A more competitive US dollar and faster world growth and trade should support US exports, especially to the fast-growing Asian economies. Meanwhile, steady domestic activity should maintain US demand for imports, with Asia heading the list of suppliers to the US and China in first place by 2030. The focus on trade with Asia will be further supported by the potential agreement of the Trans-Pacific Partnership.

Export Corridors to watch – Industrial machinery and transport equipment is expected to remain the country’s major export category for the foreseeable future, contributing about 40% of the projected growth in total merchandise exports in the decade to 2030. But other important drivers of exports will include high-value items such as scientific apparatus, chemicals and ICT goods, as well as petroleum products and plastics.

Sector contribution to increase in exports

Although Canada’s pace of expansion will lag that of fast-growing Asian markets, its proximity and size will enable it to retain its position as the top destination for US exports through to 2030. But US trade will be increasingly oriented towards Asia in the years ahead. As a result, China is expected to become the second largest destination for US exports by 2030. And the fastest-growing export markets in the decade to 2030 will include China, Vietnam, Malaysia and India (all rising at around 9% per annum).

Top 5 Hotlist Export Destinations

Rank

2013

2030

1

Canada

Canada

2

Mexico

China

3

China

Mexico

4

Japan

Korea

5

Germany

Brazil

*Ranking among the 24 trade partners covered in the HSBC Trade Forecast

Similarly, other important emerging economies such as Mexico, Korea and Brazil will continue to rely heavily on US exports to fuel their growth. Industrial machinery and transport equipment will remain the leading and fastest-growing export category in the decade to 2030.

Import Corridors to watch – The composition of US imports closely mirrors that of exports, with industrial machinery, transport equipment and information and communication technology representing the largest sectors. These sectors combined will account for almost half of total import growth in the decade leading up to 2030. Clothing and apparel and petroleum products are expected to account for another 15% of total import growth in this period. Overall, the strength in these sectors will mainly reflect solid growth in domestic activity, maintaining the pull for imports.

Sector contribution to increase in imports

China and Canada will continue to dominate US imports in the decade to 2030, with Mexico and Japan following close behind. China and Vietnam will be the fastest-growing origin countries over this period, with US imports from both increasing at about 9% per annum. Imports from India (up 8% per annum) and Mexico (up 7% per annum) will also help to drive this expansion. Interestingly, India will take over Germany as the fifth most important source of US imports by 2030.

Top 5 Hotlist Import Origins

Rank

2013

2030

1

China

China

2

Canada

Canada

3

Mexico

Mexico

4

Japan

Japan

5

Germany

India

*Ranking among the 24 trade partners covered in the HSBC Trade Forecast

FOCUS ON ELECTRONICS

  • The United States remains a world leader for ICT development, with the latest Global Information Technology Report jointly commissioned by the World Economic Forum and the INSEAD international graduate business school placing it at 7th in its ranking of 143 economies. Despite having one of the world’s best infrastructure environments, the US government continues to push for an improved policy and regulatory environment.
  • Solid consumer demand and growing business investment in the high-tech sector means the United States is likely to remain a net importer of these goods. But high-tech exports will also expand, driven by mobile phones and personal computing equipment.
  • Exports of electronics are forecast to grow by 9% per annum on average in the period 2015-2030, outstripping growth in imports of electronics which will average just under 8% a year. However, despite faster export growth, the larger size of imports will mean a widening trade deficit in electronic goods.
  • The United States is a signatory to the WTO’s Information Technology Agreement (ITA) and it has eliminated tariffs on about 150 electronic goods currently covered by the accord. The expansion of the agreement would reduce the average rate of duty on these goods applied in the United States from the current level of 3.8%.
  • But because the average rate of duty on these goods is relatively low compared with other countries, the direct impact on trade volumes will be smaller than for other signatories to the ITA. Nevertheless, the United States will benefit from increased trade liberalisation and trade volumes due to its role as a world leader in the ICT sector.

Trade in electronic goods

About the HSBC Trade Forecast – Modelled by Oxford Economics

Oxford Economics has tailored a unique service for HSBC which forecasts bilateral trade in goods, based on HSBC’s own analysis and forecasts of the world economy. A top-down approach is employed, with Oxford Economics’ suite of models used to ensure consistency between HSBC’s forecasts for economic growth and exchange rates in key countries and the more granular projections for bilateral trade flows presented here.

Oxford Economics employs a global modelling framework, with headline bilateral trade forecasts constructed as a function of final demand in the destination market and the exporter’s competitiveness (as measured by relative unit labour costs). Exports, imports and trade balances are identified, with both historical estimates and forecasts for the periods 2015-20 and 2021-30.

These headline bilateral trade forecasts are also disaggregated by sector, using Oxford Economics’ Industry forecasts to inform future production trends. Sectors are classified according to the UN’s Standard International Trade Classifications (SITC) system at the two-digit level and grouped into 30 sector headings.

Oxford Economics produces a global report for HSBC, as well as country specific reports on the following 23 countries: Hong Kong, China, Australia, Indonesia, Malaysia, India, Singapore, Vietnam, Bangladesh, Canada, USA, Brazil, Mexico, Argentina, UK, France, Turkey, Germany, Poland, Ireland, UAE, Saudi Arabia, and Egypt. The analysis also includes trade with Japan and Korea for a total sample of 25 key trading nations.

All trade flows data are reported in nominal US-dollar value terms (using market exchange rates) unless otherwise specified. This means that fluctuations in a country’s terms-of-trade due to relative price and exchange rate effects are reflected in the data.

Sector Focus – Methodology 
This report also includes a special section on the electronics industry. Based on the same underlying forecasts used for the existing analysis of trends in bilateral trade flows, the report examines how exports/imports of these products are expected to evolve over time. The definition used in the report for the electronics sector is below:

  • SITC 75 – Office machines and automatic data-processing machines 
  • SITC 76 – Telecommunications equipment 
  • SITC 77 – Electrical machinery 
  • SITC 87 – Professional, scientific and controlling instruments 
  • SITC 88 – Photographic apparatus, equipment and supplies and optical goods

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