13 June 2025

Jonathan Sparks

Chief Investment Officer, UK, HSBC Global Private Banking and Premier Wealth

The global trade landscape is shifting under the weight of resurgent U.S. tariffs and fractured geopolitical relations. What began as a targeted policy against Chinese goods has now cascaded into a global realignment of supply chains and trade routes, impacting three of the world’s major economies in markedly different ways: China is absorbing the direct hit, India is emerging as a strategic beneficiary, and the UK is navigating the fallout.

With average U.S. tariffs on Chinese goods nearing 40%, Chinese exports to the U.S. have plunged down 33% month-on-month in April 2025, reaching their lowest levels since early 2022. High-frequency data from shipping trackers and port activity show a dramatic decline in outbound shipments to the U.S., while business sentiment in China has deteriorated. Manufacturing PMIs (Purchasing Managers’ Index) dipped below the expansion threshold, though a post-truce rebound in May offered mild respite. In response, Chinese exporters are rerouting through Southeast Asian hubs Vietnam, Thailand, and Singapore, while a modest deflection to Europe is also visible. However, the broader export picture remains under strain, with sustained pressure from tariffs and weakening global demand. In all of these, if we analyze the new export orders gauge, it rose in May after the tariff pause. 

Source: Bloomberg, 12 June 2025.

If we analyze how India stands in terms of trade, it’s on the verge of a transformative shift. Recent negotiations between India and U.S. suggest a trade deal could be reached soon, rolling back retaliatory tariffs and boosting Indian exports across textiles, electronics, and pharmaceuticals. It is expected that India’s exports to the U.S. could grow 64% above baseline, with GDP receiving a 0.6% boost within a decade if tariffs are lifted. Sectors such as textiles and low-cost consumer goods are positioned to thrive, especially as global companies look to diversify away from Chinese supply chains.

In the midst of all the trade talks, the UK presents a more mixed story. Data from April shows UK GDP fell 0.3% month-on-month, dragged down by both services and manufacturing. One of the biggest culprits? Trade disruption. The trade deficit was at its widest since early 2022, driven more by the reversal of pre-start frontloading and a 33% month-on-month collapse in exports to the U.S. which is the lowest level since early 2022. Even as the UK signed three recent trade deals, including with the U.S., implementation has lagged. While signals from U.S. officials suggest a desire to move forward, potentially including UK car exports and ethanol, the delay is weighing on activity.