HSBC Sees India, Japan, China As Favored In Trade Deal Talks

Japan, India and China are likely in “pole position” to secure a long-term trade deal with the US, while Singapore and Australia could also “unexpectedly race ahead,” according to Frederic Neumann, chief Asia economist at HSBC Holdings Plc.

“As the largest investor in the US and a major military ally, Japan might normally be first in line for any trade deal among Asian economies,” Neumann wrote in a note to clients dated Thursday.

He cited US President Donald Trump’s recent claim that India had offered to completely drop its tariffs as well as continued talks between the US and China among reasons for why these countries may bag a deal soon.

For US multinational corporations, Japan, India, Indonesia and other Asian economies are collectively even more important than China, Neumann said, adding American firms are therefore likely to lobby against raising trade barriers on these economies.

For their part, Asian economies will need to ramp up their imports from the US, Neumann said.

“Successful trade negotiations could hinge on commitments to purchase key products promoted by the Trump administration,” Neumann wrote. “Moving forward, we expect many Asian economies to ramp up strategic purchases of US mineral fuels, aircraft, and agricultural products, along with automobiles and military hardware when applicable.”

Besides making strategic purchasing commitments, Asian economies can also address US concerns over alleged non-tariff trade barriers. Announcements on investments in the US could also be a good way for policymakers in Asia to get some goodwill, Neumann added.