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Perspectives: The rewiring of global trade
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How is the global trade landscape evolving and what does it mean for businesses navigating uncertainty?
In the latest episode of HSBC Perspectives, trade expert Ambassador Michael Froman, President of the Council on Foreign Relations, speaks with Michael Roberts, HSBC’s CEO of Corporate and Institutional Banking, about how policy shifts, geopolitics and resilience priorities are reshaping trade and supply chains.
Watch or listen to find out more.
This episode was recorded on the sidelines of the HSBC Global Investment Summit in Hong Kong in April 2026
Find out more here https://www.business.hsbc.com/en-gb/campaigns/global-investment-summit
Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
Introduction to HSBC Global Viewpoint
00:00:01
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto to today's show.
Global Trade at Investment Summit 2026
00:00:21
Speaker
Welcome to Perspectives, HSPC's video podcast series exploring the fast-moving trends shaping the global investment landscape. I'm Michael Roberts, and I'm coming to you from Hong Kong in our Global Investment Summit 2026. Today, we're talking about global trade, a very important topic in particular during the last year. I'm delighted to have as our guest Ambassador Michael Froman. who is currently the president of the Council of Foreign Relationships, one of the most influential voices on how U.S. policy and global geopolitics shapes the trading system.
00:00:56
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Ambassador Froman has held roles as the U.S. Trade Representative and Deputy National Security Advisor for International Economic Affairs under the Obama administration.
Evolution and Trust in Global Trading System
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He has vast experience and extremely timely perspectives that is very relevant to today's conversations. So let's jump into it. Let's talk trade. Let's talk where we are today. Let's talk about the new world economy.
00:01:18
Speaker
Welcome, Michael. Thank you very much for joining for having me. so first question, you truly have been at the heart of US trade. You've negotiated trade treaties. You've been highly involved in the World Trade Organization, looking at various sort of the architecture of global trade.
Fragmentation and Regional Agreements
00:01:32
Speaker
How would you describe the current situation today, that current architecture, in particular because underpinning most of it is trust, trust in global commerce, trust in your trade partners, etc. Well first of all I think that the evolution of the the global trading system has been underway for some time. i think President Trump may have put the the nail in the coffin of the multilateral trading system but it had been under stress for quite a while in part because it wasn't really designed to include and incorporate an economy as big and as important as China that followed a fundamentally different economic strategy than a lot of other countries and we've seen those stresses evolve over the last last several years. i think what it's going to lead to is a lot more fragmentation in the world. We're not likely to see big multilateral trade rounds like we have in the past, but rather groups of countries coming together, coalitions of the willing, coalitions of the ambitious, and working together where they find common interests and where they have trust, as you said. So some will pursue trade agreements like the CPTPP, the Comprehensive and Progressive Trans-Pacific Partnership. The UK has now joined that.
00:02:39
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Other countries are considering
Impact of Global Events on Trade
00:02:41
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joining it. In the case of the U.S., trade agreements of that sort are not in fashion right now. But I think you'll still see the U.S. gathering together countries, for example, around critical minerals and working together to come up with trusted supply chains. And I think that is going to be perhaps a a major theme going forward is who can you work with that you trust around an issue that is critical to national security.
00:03:02
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As you mentioned, there has been a big shift in US trade policy, much less multilateralism, much more bilateralism. And to be determined in the future, as you said, it may be even more specific to that.
00:03:13
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However, that has produced an enormous amount of volatility. Liberation Day itself, with a Very momentous event, obviously. Lots of uncertainty followed thereafter. We've had other bigger sort of events. The Supreme Court decision, obviously, was a big legal event, but actually has implications on trade. We now have the Middle Eastern conflict, the closure of the Strait of Hormuz.
00:03:34
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So if you think about it, you know How disruptive is all of this? And is this just going to be disruption, you think, in the global trade, again, architecture that can be put back together in some sort of normalized form in the future? Or does this accelerate sort of that complete change in the world supply chains and the trade that underpins it?
00:03:56
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I don't think the pendulum is likely to swing all the way back to where it was before. um i think we are likely to live in a world that is more expensive, less efficient, more focused on resilience and redundancy, diversification and national security.
00:04:12
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It used to be that the entire trading system was really built around the notions of efficiency. Where could you put your supply chain to produce the the greatest variety of products at the lowest possible price? I think now, while efficiency is one value,
00:04:25
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national security, diversification, resilience, those are other values. They're going to introduce frictions into the system and costs into the system. and I think that's real. And it's not just a U.S. factor that the U.S. may be leading the way in terms of raising tariffs in that regard.
US Trade Policy Shifts and Tariffs
00:04:40
Speaker
I think other countries are looking at Chinese overcapacity as one example and are beginning to say, OK, we need to protect our own industries. And so they were likely to see barriers go up. and not And once barriers are put in place, tariffs are easy to adopt and hard to to remove because you have constituencies that have interest in them, you have interest in the in the fiscal benefit of coll collecting tariffs. And so i think it's going to be very difficult to go back to the way things were before. We saw in the Biden administration. They did not lower tariffs on China that the previous Trump administration put in put in place. We now have about, what, 17%, 18% effective tariff rates.
00:05:16
Speaker
The next administration comes in. We have a growing budget deficit. The world has gotten used to U.S. tariffs. Perhaps U.S. population has as well. Is there any chance those will be reduced? I think there's a chance that they'll be reduced selectively.
00:05:30
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I think the affordability issue in the United States is a very important political issue and as as chairman of the Fed Jay Powell has indicated, half to three quarters of a percent of the inflation rate, current inflation rate, is attributable to to tariffs. that we'd be down around two slightly more than 2% the magic number if it were not for for tariffs. So I'm hopeful that a future administration ah from either party comes in and looks at the tariffs and says, okay, what products do we really need to protect? What's important to produce here in the United States? And which ones are less strategic? Do we need to make sneakers and and
00:06:05
Speaker
clothing plastic Christmas trees and plastic Christmas trees we right now we have what we call a section 232 which is a national security provision we have a section 232 tariff on furniture I'm not sure that the furniture cupboards cabinets kitchen cabinets rise to the level of of a national security issue and I'm hopeful that over time because tariffs have become such a a significant political issue now people are talking about it when when cab drivers and uber drivers are talking to you about the impact of tariffs on their life, you know it's a broad-based issue. I'm hopeful that a future administration is able to take a more strategic approach to it going forward. And that's an interesting narrative, I think, is in my own view, is that globalization was great for efficiencies, as you mentioned.
00:06:47
Speaker
We didn't explain to the American population what globalization meant. There was no narrative about the value of globalization. So do you think in future years that that narrative can be changed? Because you know you mentioned, I know, some various bilateral trade agreements.
00:07:03
Speaker
None of that is ever explained in any sort of context of what the value is. So if you were advising the next president, he says, Michael, what do we do? How do I explain it to the constituencies? What do you say You know, when I was a U.S. trade representative, I would have, I worked hard to try and get reporters to cover trade. It was always very difficult because it's boring, it's nerdy, it's geeky. You know, now every reporter is a trade expert. And so I'm hopeful that one of the benefits of this will be that the the public has a better understanding of globalization of trade and how it impacts their lives. We never fully connected how the trading system affects their lives. And I'm hopeful of that. And yeah the other thing about globalization is the benefits in many respects were broadly shared, but invisible.
00:07:45
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Nobody walked out of a Walmart and said, thank goodness for the World Trade Organization. But the cost of globalization, while more of it is around technology than globalization, the cost of technology of globalization in terms of closing down factories, losing jobs, that was very visible. and very targeted in various communities. And that became the rallying point. We never really seemed to make that connection and say, if you're going to be dislocated,
Globalization, China Shock, and AI Impact
00:08:10
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we will help you because it is beneficial for the entire society. That's absolutely right, Michael. I mean, I think both Republican and Democratic administrations in the US have not invested the amount of effort necessary to say, what is it going to take to ensure that workers can survive and thrive in a rapidly changing economy? That's coming from technology or trade or immigration. And the reason why that's important now is that when you look back, the so-called China shock in the US probably contributed the loss of 2 to 3 million manufacturing jobs over 12 years.
00:08:40
Speaker
The AI shock is expected to contribute to something much, much greater than that over a much shorter period of time. And we're still we still haven't thought through what we need to do to make sure everyone can benefit. and get and support the system going forward. No, and I agree. And in fact, we just talked about it today at this conference about that impact and how quickly it's going to occur. So we're talking about it, but to your point, no one has any policy remedies. yeah And it will, I think, be much, much greater, and have much greater impact on society with knock-on effects. It will be much, much more serious. so Getting back to trade, you were very involved in WTO for many years, you were very involved in the the comprehensive treaty, ah in the CTPP, I guess it was at the time.
00:09:23
Speaker
None of that seems to have worked particularly well. Firstly, is the WTO now irrelevant? Two, we've seen a spate of various bilateral tax bilateral treaties signed. The EU has been quite active, been signed several in the last, what, 12 months. The UK has signed So are we entering the world where multilateralism is dead and it's going to be bilateralism, again, on a very specific basis? The US is...
00:09:51
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don't know if you use the word signed, but has announced many treaties with very many partners. So what happens in this very sort of fragmented world we're living in? like I think the WTO is is sort of hit a cul-de-sac. It's hard for it to to play the functions that it was originally designed to play. It's not its fault. The WTO can only do what its member states want it to do. And when you've got
WTO Challenges and US-China Relations
00:10:15
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China following its own set of rules and now the U.S. following its own set of rules, the two largest economies of the world basically aren't playing.
00:10:22
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And that makes it hard for the for the rest of the system to to work. There still are some fundamental principles and processes at the WTO that are important to to continue and a lot of the middle powers I think will will continue to do that. But to your point, you know I call it open plural lateralism, meaning countries will come together, not 165 countries like the like the WTO, but half a dozen countries here, half a dozen countries there. are They'll work together around some set of issues. For some, that will be reducing trade barriers, integrating like a free trade agreement. In other cases, it may be having a common approach to export controls or to critical products. And that's, I think, where the US is likely to be. And hopefully over time, those systems sort of grow up and you begin to create more rules, even among a subset of countries, that can create some predictability in the markets. You spoke of the two most important economies, China and the United States, which together count to what, near 50% of total global GDP. Trade both ways has fallen about 20% last year. So what is the future of that trading relationship? Can they decouple, as some would like, or is it too integrated and there's just no way they can actually do so? I think we're likely to see selective decoupling, so particularly when it comes to high technology products, the ones that we want to keep out of China's hands, the most advanced semi-deductors. Build the wall around the garden? The the garden, and the question is how big is the garden and how tall is the wall? But there are a lot of products that we ought to be able to trade with each other.
00:11:51
Speaker
And right now the focus is on things like agriculture and energy, but we ought to be asking the question, what manufactured products is China interested in buying from the rest of the world? And and then but what is it we want to buy from them that is not that is not strategic, that is not related to national security or to intelligence or to our economic competitiveness writ large? And I think that is a more ah firmer foundation. And I'm hopeful. the the president President Trump and President Xi are scheduled to meet as many as four times this year.
00:12:21
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And that hopefully over the course of those meetings, they can put the economic relationship on a more stable footing going forward. If you were to advise President Trump, you mentioned it today, it's a lot of but the trade from the United States to China seems to be agricultural based.
00:12:36
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I've always considered those commodities. yeah Anyone can buy them at any price. Price published almost on an hourly or minute by minute basis. What should be that strategy? Because I think it's got to be more value added product for more value added product. Well, look, I totally agree. I think we're in this weird situation. If you look back at the last summit meeting between the two presidents, the agenda was soybeans, fentanyl and TikTok. Now, all three are very important, but it's a vegetable, a drug and a social media platform. This is the most important relationship in the world. We've tried over the years to encourage China to move towards a more domestic demand-led, consumer-led, services-oriented economy. We haven't had much success in encouraging that, but it's now more than ever, it's important because of the size of China. It cannot continue to grow its exports so much faster than global demand.
Regionalization and Supply Chain Future
00:13:28
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A lot of this really is down to the potential retreat of globalization.
00:13:33
Speaker
You know, as you mentioned earlier, globalization caused, say, the hollowing out of the industrial base in United States, certainly the view of many, two to three million jobs lost. And it was highly concentrated, in particular, in you know various parts of the country, Ohio being a very good example.
00:13:48
Speaker
Are we seeing the retreat of globalization in favor of the rise of regionalization? I think that's probably right. I mean, as you mentioned earlier, the EU is out negotiating free trade agreements with Brazil, with India, i mean with Mercosur, with India. The UK has joined TPP and and has has negotiated trade agreements as well. So I don't think it's universal that people are retreating, but I think we're likely to see more regionalization or more collaboration among countries that view themselves as having sort of a trusted network with each other that they want to develop. around particular issues than full globalization.
00:14:27
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On the other hand, globalization is a force. It's not about trade agreements. In my view, globalization is driven much more by the invention of the container, which allowed supply chains to be put anywhere it made sense to in the world, or about the spread of broadband, which allowed services to be provided from anywhere in the world. Those forces are going to continue, but the policy issues and the policy obstacles to that kind of globalization are likely to rise as well.
00:14:50
Speaker
Yeah, exactly right. You, I know, advise many CEOs. You have many CEOs part of the CFR. If you're so advising a CEO today, trade has become a major priority.
00:15:02
Speaker
I will guarantee you two years ago, it was relegated down to the procurement you know area or you know the the businesses. says It was not a major strategic area. What would you advise them? i mean, they have to continue to produce for optimization. They have to serve markets around the world. They need to move their supply chains to make them as efficient as possible. They have to also at the same time create resiliency in those supply chains and deal with a lot of geopolitical pressures. Absolutely.
00:15:31
Speaker
what do you tell them to do? Do they go global or they stay global? Do they go regional? Do they go go local? I know it's deeply frustrating, particularly right now, where it feels like the policies can change week by week or sometimes hour by hour. i think it's important to take a step back and say, what are the big secular trends that we're seeing? And I think those secular trends are greater fragmentation, some selective decoupling. i don't i don't think those issues are going to go away. And there is, we are, US and China are engaged in a multi-dimensional competitive situation that cuts across politics, military competition, economics and technology. And that's not going away anytime soon.
00:16:08
Speaker
So I think i think one one possible outcome is just as many companies as they look at their supply chains are thinking about building in China for China, they may well have to think about building in the United States for the United States.
00:16:21
Speaker
given the uncertainty around what the tariffs are likely to be or what the restrictions are likely to be. And that's a little bit what the Trump administration is trying to seek. they want to say it's it's The message it's sending to to companies is this uncertainty is ah is a a feature, not a bug. If you want to get ah away from uncertainty, there's only one certain thing you can do, and that is move your production back home. And I think there is probably some logic to that, not for everything, but if the U.S. is an important market,
00:16:46
Speaker
They may not be able to count on the free flow of goods back and forth in the way that they have in the past. Now, there have been a lot of agreements, some would say promises to onshore, friendly shore, but really bring that production back to the US.
00:17:01
Speaker
At the end of the day, what do you think the trend is? Are people really going to bring that production home or did they just sign in a lot of- i think it may depend a bit from sector to to sector. and A number of countries have made very significant commitments. Japan, Korea, Europe.
00:17:14
Speaker
Hundreds and hundreds of hundreds of billions of dollars. Some of that's beginning to see and anecdotally a few a few deals with Japan and and anecdo anecdotally some companies are moving forward. But that's why I think one has to look particularly for these big capital allocation decisions beyond one administration. i think you we really have
Role of Services, AI Impact, and Economic Resilience
00:17:32
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to look at the the broader segment trends. A longer term view.
00:17:36
Speaker
You know, one thing that's always struck me in all of these discussions is that in in a digital world, a much more sophisticated world, no one talks about services in trade.
00:17:47
Speaker
They talk about goods. Again, plastic Christmas trees. Where do services fit into all this? I mean, it's about, what, 25%, 30% of total global trade. It's growing much faster, by the way. And it's 80% of the U.S. economy. And it's 80% of the U.S. economy. And we're really good at it. And for the first time, services jobs on average pay more than manufacturing jobs. That's a new trend. It's a real issue. Now, of course, we have to see what impact AI ultimately has on the service sector as well, where the impact is likely to be quite more significant perhaps than even in manufacturing. This administration, this president has been very focused on goods.
00:18:21
Speaker
You manufactured goods in particular and the special role that that people attribute to manufacturing as a key part of innovation in an economy. They tend to undervalue the the contribution of services and and instead focus on manufactured products as well. But services are very important. And the US, as you said, is very good, at as are as is Europe, UK, elsewhere, and Japan, etc. And so it is an important thing to keep in mind. The barriers to services trade are more difficult to get at. These are non-tariff barriers. And so they tend to go to regulation, and those tend to be sort of driven by a lot of domestic concerns.
00:19:00
Speaker
But it's an important part of of any sort of real trade negotiation. In conclusion, as we look out the next five years, but what are the positives that you look to? And what are some of those still ongoing risks that would continue to concern you i think on the positive side, the global economy has proven to be remarkably resilient.
00:19:20
Speaker
yeah We have this incredible disruption of the trading system. We have wars, the Ukraine that have been going on now for more than four years, in the Middle East, now with Iran. And there's fundamental changes going on, fundamental risks going on. And yet, the economy continues to grow, capital continues to to flow. I think on the sort of the risk side of things, I think the the risk is we're going live in a more expensive, more fragmented, less efficient world. And we just have to get used to that.
00:19:52
Speaker
And, you know, political leaders need to have that conversation with their public so that you're going to end up spending more because it's important to national security ye or it's important for resilience and getting folks used to that kind of of change. Because for a lot of people, you know it's's The affordability issue is really hitting them close to home in their pocketbooks, around the kitchen table. and that a failure to really explain and and to bring people on board is the kind of thing that leads to its a populism, protectionism, and sort of the impulses that people bring to their politics as well.
Concluding Insights on Trade Complexity
00:20:23
Speaker
Michael Froman, thank you very much. It's been a great pleasure. Thanks for having me. Great see again. Several additional hours to talk about this. So thank you all very much for joining. Trade is at the heart of everything we do. We were born as a trade bank. We will continue to be so. We serve the world. We connect the world. This is a vitally important discussion both for our organization, but more importantly, for our clients. They live and breathe the trade. It is going to be a more complicated world, as Michael said.
00:20:47
Speaker
We need to help our clients understand their complexity. We need to serve them. We need to provide those answers and those insights. This is a big part of that. So again, Michael, thank you very much. Thank you. Thank you for joining us at HSBC Global Viewpoint.
00:21:00
Speaker
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