World Economy

Europe’s biggest bank says firms are 'turning home' as protectionist fears take hold

Key Points
  • Three in five firms surveyed around the world believe protectionism is on the rise.
  • HSBC has claimed firms are showing agility in the face of trade barriers.
  • Three-quarters of companies remain optimistic about growth.
Chinese trucks carrying trade goods are pictured at a port in Pakistan.
Aamir Quereshi | AFP | Getty Images

As protectionism becomes a key watchword for executives, a global report has suggested that companies are finding various ways to ride out any barriers to trade.

Of 6,000 firms surveyed on behalf of HSBC, 61 percent said that governments were becoming more protective of their domestic economies. The sentiment was strongest among companies in the Middle East and North Africa (70 percent), and Asia-Pacific (68 percent). In the U.S., 61 percent believed that protectionism was on the rise, while in Europe, only 50 percent saw a rise in protectionist tendencies.

The survey, released Wednesday, also found that a majority of firms were looking to regional partners to develop trade opportunities. Almost three quarters (74 percent) of overseas trade in Europe and Asia-Pacific is being conducted within the same region.

Noel Quinn, chief executive, global commercial banking at HSBC, said businesses are proving themselves agile at straddling the global trading environment.

"They see the emergence of e-marketing and electronic supply chains as a way to offset some of the protective measures. A number of businesses are relocating part of their supply chain to sit within the markets," he said in a phone call with CNBC.

Quinn said that as many as 28 percent of firms surveyed were looking at joint ventures and subsidiary companies to navigate any local barriers. He added that many other firms were openly accepting that higher costs were coming due to protectionism and will "just have to get on with it."

Despite admitting to protectionist fears, the same HSBC report claimed that more than three-quarters of respondents were optimistic about future international trade prospects.

The main reasons behind this confidence included an increase in demand from consumers and businesses, favorable economic conditions, as well as the greater use of technology to drive growth and help reduce costs.

Click on chart for a clearer view

Source: HSBC

One other source of support for global trade could be a not-so-mighty dollar.

HSBC estimated that the U.S. dollar, which has dropped 8 percent in trade-weighted terms since the first quarter of 2017, should bolster trade volume elsewhere going forward.

The bank's researchers cited evidence over the last 30 years that showed that weakness in global trade has mirrored periods of a strong U.S. dollar.

HSBC also asked about the impact of global government policies and found that when an issue originated outside of a company's own region, there were few fears held.

Click on chart for a clearer view

Source: HSBC

One example is that nearly 60 percent of respondents in Asia thought that ASEAN 2025 and China's Belt and Road initiative would help their businesses over the next two years. Conversely, most respondents in Europe and North America said these initiatives would have no impact.

As for U.S. policy, almost 40 percent of global firms questioned expected no impact from decisions taken in Washington over the next two years.