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.
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 with 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%) with a 10 percentage point increase in interest for the US
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 most optimistic with 58% of those surveyed reporting it will help their business in the next three years.
"Intra-regional trade is still international trade, and global trading opportunities supply the greatest gains," said Dan Leslie, Head of Client Coverage at HSBC Bank Canada. "The great majority of consumers and capital lie outside Canada's borders, so taking advantage of global markets will always represent the greatest opportunity for ambitious companies that want to grow their businesses."
Pivoting to intra-regional rather than inter-regional trading opportunities is also observed in other regions. European companies citing Asian markets 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%.
Key Findings for Companies in 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 Companies in 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 Companies in 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%)
• Data is one key enabler of business strategies with just under three-quarters (72%) of Canadian firms are using data to optimize performance. Operational and transactional data (each used by 47% of firms) were the most common type of data sets employed by businesses. While customer personal data was the next most popular type of data (used by 46% of firms), data privacy was cited as both a key risk and opportunity for Canadian businesses
• Many Canadian firms also intend to invest in developing key skills among their workforce and productivity growth, perhaps in light of historically low unemployment and a tight labour market