Euler Hermes, the world's leading provider of trade credit insurance, expects U.S. exports to grow by $88 billion or 5% in 2015, despite tepid global GDP growth.
"Demand for U.S. exports is, of course, dependent on the strength of the global economy," said Dan North, senior economist for Euler Hermes Americas. "While the global economy is set to enter its fourth straight year of lackluster growth, the U.S. economy continues to grow and many of our industrial sectors are showing strength both at home and abroad."
According to the company's Economic Insight report released today, the U.S.'s biggest export gains in 2015 will come from Canada, China and Mexico. Euler Hermes also projects strong export increases to smaller countries in Asia, Latin America and the Middle East, reflecting recent rapid growth in these emerging markets, while also providing the U.S. with more diversification in its export composition.
Export gains will primarily come from the agrifood, chemicals, energy and mechanical sectors. Textiles and ferrous metals show the smallest increases as the U.S. has become a much smaller player globally within these industries. As U.S. energy companies are expected to start exporting natural gas globally by the end of 2015, revenues from this sector could be significant, growing from $16 billion in 2012 to $42 billion in 2040 or nearly 1 percent of GDP.
The planned 2016 expansion of the Panama Canal, which may double its capacity, will also boost U.S. trade by allowing larger ships to carry exports from the U.S. through the canal, significantly reducing costs and making those exports more competitive.
The U.S.'s largest trade deficit is with China, but several factors could shrink it, especially as China pivots toward a more domestically driven economy. The U.S. natural gas boon and favorable labor conditions have reduced China's competitive wage advantage to the point that jobs are returning to the U.S.
The Future of Free Trade
In the coming year, exporting companies will face three major risks:
The value of the U.S. dollar is expected to rise in 2015 making U.S. exports more expensive and less competitive.
Export financing faces several challenges, including tight lending conditions and risk-averse bankers. Rising rates in 2015 may make financing more costly and/or harder to obtain, especially given fragile global growth and geopolitical uncertainty.
In 2015, global business insolvencies as measured by the Euler Hermes' Global Insolvency Index are expected to fall 3 percent, a much slower rate than 2014's decrease of 12 percent. At the same time, insolvencies still remain 12 percent above 2007's pre-crisis levels, meaning that exporters will need to continue stringently evaluating their partners for insolvency risk.
To further promote U.S. exports, two major trade agreements – the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership – are currently being negotiated to reduce the burden of customs, regulations, tariffs and taxes. They would both lower barriers to trade and allow increased access to new markets.
www.eulerhermes.com
