Global Trade Crossroads: HSBC Warns of Risks in an Uncertain Economy

The global economy is at a critical juncture, with HSBC’s latest report sounding a stark warning about escalating trade risks and economic uncertainty. As geopolitical tensions, protectionism, and policy unpredictability collide, businesses and investors face a precarious environment. This article dissects the risks, identifies opportunities, and underscores the need for strategic resilience.

The Looming Cloud of Trade Uncertainty

HSBC’s May 2025 report highlights a “serious” threat to global growth, driven by shifting trade policies and geopolitical friction. The unpredictability of U.S. tariffs—particularly under recent administrations—and retaliatory measures by trading partners have destabilized supply chains and raised the specter of bad debts. reflects investor anxiety, with shares hovering near multi-year lows as the bank increases loan-loss provisions amid deteriorating economic outlooks.

Key Risks:
1. Policy Volatility: The U.S. tariffs on steel, aluminum, and agricultural goods have triggered retaliatory measures from China, Canada, and Mexico, disrupting trade flows. For instance, China’s 15% tariffs on U.S. agricultural exports have slashed demand for soybeans and pork, leaving farmers with surplus inventory and rising bad debt risks.
2. Geopolitical Friction: Conflicts in the South China Sea, Ukraine, and the Middle East threaten shipping lanes and energy supplies, compounding supply chain vulnerabilities.

Regional Winners and Losers

While global trade faces headwinds, emerging markets are poised to capitalize on shifting dynamics.

Emerging Market Opportunities:
- Asia’s Rise: Bangladesh, Vietnam, and the Philippines are projected to see 5%+ annual export growth through 2029, driven by diversification and lower reliance on traditional trade partners.
- Digital Trade: The WTO reports global digitally delivered services exports hit $4.3 trillion in 2023, with India and ASEAN nations leading in outsourcing and tech services.
- Trade Agreements: While the EU-Mercosur deal remains stalled due to French opposition and legal disputes, India’s negotiations with the UK, EU, and Australia signal a race to secure new markets.

The EU-Mercosur Stalemate

The EU-Mercosur trade agreement, pending since 2019, is emblematic of the geopolitical and policy gridlock hampering growth. France’s insistence on stricter environmental and agricultural safeguards has blocked ratification, despite Brazil’s push to counterbalance Chinese influence. illustrate how markets in trade-benefiting regions have outperformed those in stalemate-ridden blocs.

Navigating the Storm: Investment Strategies

1. Focus on Resilient Sectors:
2. Digital Infrastructure: Invest in companies enabling cross-border data flows and cloud services.

3. Regional Champions: Back firms in ASEAN and India benefiting from trade liberalization (e.g., Vietnam’s manufacturing sector).

4. Hedge Against Policy Risk:

5. Diversify geographically to avoid overexposure to tariff-heavy regions.

6. Use derivatives to offset currency fluctuations caused by trade imbalances.

7. Monitor Policy Developments:

8. Track the EU-Mercosur talks and U.S.-China trade negotiations for pivot points.

Conclusion: Growth Amid Turbulence

Despite the risks, HSBC’s report underscores that global trade remains the “glue” binding economies together. While 2025 export growth is projected to hit just 2%, emerging markets and digital services offer avenues for outperformance. However, the path forward hinges on resolving policy disputes and avoiding full-scale protectionism.

The data is clear:
- Bad debt provisions at HSBC and peers have surged as a result of trade-related stress.
- Emerging markets like Vietnam (VN Index up 18% YTD) and India (BSE SENSEX +12%) are outpacing developed markets amid uncertainty.
- The EU-Mercosur deal, if ratified, could add $100 billion annually to EU trade, but its fate remains tied to French pragmatism.

Investors must balance caution with opportunism. Prioritize flexibility, diversification, and companies with exposure to digital trade and regional powerhouses. The next 12 months will test whether global leaders can turn the tide—or let uncertainty define the decade.