HSBC sees threats in the global rise of protectionism

HONG KONG – In a new Global Research Report, HSBC says trade protectionism is becoming an increasingly important political issue in the United States and Europe, and that there have been an increasing number of actions globally to restrict certain trade flows, which partly help explain the downturn in trade and weak economic performance.

“Each year, hundreds of new measures are added. Perhaps 5% of global trade is affected,” HSBC says.
“Protectionism is also taking new forms. Traditional border measures like tariffs, bans and quotas are still used. But so too are government procurement preferences, bailouts, state aid and localisation requirements.
“According to Global Trade Alert, Argentina, Brazil, China, India, Indonesia and Russia are among the heaviest users of restrictive measures, often affecting each other's trade, as well as trade with EU members, Japan, Korea and the United States.
“The US and European nations are frequent users of trade restrictive measures as well, often impacting China's trade, among others. More positively, Saudi Arabia has generally avoided such measures, and Australia and Mexico have relatively few.
HSBC says further increases in protectionism could lead to a less competitive world and greater inflationary pressure, and that this could drive down investment and hurt corporate margins and earnings.
“Consequently, the probability of an asset price deflationary scenario could rise. Moreover, further attempts by politicians to protect their markets are likely to increase economic and financial volatility even more, which in turn could drive up risk premia across asset classes.
“Emerging markets would be likely to suffer disproportionally as their growth models are largely focussed on external rather than domestic demand. www.hsbc.com (ATI).