In Canada for example, export expectations fell significantly in Q1 (-10pp) – which coincided with the new US administration declaring it may scrap the North American Free Trade Agreement (NAFTA). In recent weeks, however, it appears NAFTA may be renegotiated rather than ended. It will be interesting to see how firms in Canada and Mexico respond next quarter.
Meanwhile the upcoming EU-UK Brexit negotiations and German federal elections have the potential to disrupt long standing trading arrangements with ramifications for the European single market and beyond. Businesses will need to monitor these events and assess the impact to their existing export plans.
On the other hand, the US and China have just announced a series of major trade deals. The impact on global trade flows could be sizeable. These are the world’s two biggest economies and if the amount they sell to each other increases, we could see a positive knock-on effect ripple through American and Chinese business supply chains.
These uncertain times require business agility
Despite the uncertainty regarding future trade policies, the underlying economic fundamentals are improving which will provide opportunities for exporters. Therefore, to seize the opportunities in these dynamic environments, exporters will need to build agility into their business.
Exporters will need to remain vigilant and put in place mechanisms that enable them to spot and assess the impacts of changes in trade policy on their traditional markets while seeking opportunities in new markets.
Technological advances could also provide growth opportunities for exporters by enabling them to access and compete in new markets while improving their responsiveness to changes in demand. Businesses should not view technological disruption as a threat but instead embrace technology as a means to improve their agility and flexibility empowering them to react swiftly to sudden shifts in trade policies and new opportunities.
For further information please contact:
Andrew Brosnan, insight and thought leadership, Grant Thornton