Talking tariffs, AI efficiencies, and UK consumers
WHAT HAPPENED IN FEBRUARY?
We looked at what a flurry of tariff announcements could mean for global trade and economies worldwide.
Elsewhere, we asked whether artificial intelligence (AI) could help governments save money, analysed the findings of our latest survey of 2,000 UK consumers, examined future cities in the Gulf, investigated China automation, and took a closer look at Indian autos.
So, what were the key talking points? Read on to find out…
Talking Point: What could US tariffs mean for China?
Theme: Trade Flows
One of the biggest talking points over the last month has been how China might react to US trade policy uncertainty.
Although it’s a contemporary question, perhaps the best way to answer it is to draw on insights from the US-Japan trade conflict that occurred during the 1980s.
That’s exactly what Frederic Neumann , Justin Feng , and Jing Liu did in their recent report on US-China trade tensions. In the process, they offered six lessons for what we might see in the year ahead:
?? China could replace exports to the US with overseas direct investment
?? Other partners may discover the limits of ‘derisking’ from China
?? Beijing is likely to boost trade with emerging market partners
?? Elevated trade risks could prompt more forceful stimulus
? A currency grand bargain, similar to the 1987 Plaza Accord, seems unlikely?
?? The dynamics of high-tech innovation and manufacturing may prove key in the longer term
Our thoughts…
It’s also worth asking whether elevated trade risks could actually be a blessing in disguise… the threat of tariff escalations and new trade restrictions could push China to implement stronger property stabilisation measures, more forceful fiscal and monetary easing, and structural reforms to boost domestic consumption.
To hear more from Fred and Justin on this topic, you can listen to a very special edition of the Under the Banyan Tree podcast (also available on Apple, Spotify or wherever you get your podcasts). Or, if you’re a client of HSBC Global Research, you can read the full report from the following link…
Full report
?? US-China trade tensions - Six lessons from Japan’s experience | https://www.research.hsbc.com/R/84/CTSgjpJnDbG7F7?
Talking Point: Can AI help governments cut costs?
Theme: Disruptive Technology
On the back of a year packed full of elections, governments across the world are faced with many pressing issues that the electorates want to see tackled. However, this is easier said than done, with high debt levels, interest bills and demands on the public sector rising from ageing populations.
There is hope, however, from the technological breakthroughs in recent years – notably in terms of AI. With governments going after efficiency savings, could AI transform how much it costs the state to provide public services?
James Pomeroy investigated this question further in a dedicated report. His conclusion? A bit of yes, and a bit of no…
? On the one hand… these new technologies could streamline the provision of government work such as processing data, administrative work and information gathering, with some more transformative changes too.
? But on the other hand…? these benefits look set to be relatively small against the scale of spending in areas that technology can’t help with – such as debt service, pensions and social security.
Our thoughts…
It’s likely that we’ll need to see more substantial changes in the provision of public services or payments to cut government spending. Without such changes, efficiency gains can achieve only so much, even with the adoption of AI.?
To read James’s full thoughts, clients of HSBC Global Research can access his dedicated report from the following link…
Full report
?? Can AI balance a budget? - Governments’ potential efficiency savings – and their limits | https://www.research.hsbc.com/R/84/cWkhqZJnDbG7F7?
Talking Point: What’s on the mind of UK consumers?
Theme: Future Consumer
In January of this year, we commissioned Toluna to carry out the latest update of our UK consumer survey. The goal was to take the temperature of 2,000 UK consumers through 87 questions as we enter into yet another uncertain year, with inflation looking to increase somewhat alongside an expected rise in real incomes.
So, what were the key findings? As Paul Rossington and Pankaj Agarwala, CFA explained in their report…
?? Respondents are more concerned about the cost-of-living vs last year, with nearly half expecting a decline in real incomes.?
?? Of those who expect stronger real incomes, a majority expect to save more.?
?? Continued concerns around greenwashing and cost of living pressures could be preventing more sustainable choices.?
?? Holidays remain prioritised (albeit consumers are more cautious on holiday spend).
?? Lower-ticket entertainment is more resilient.
Our thoughts…
As the ninth survey in the series, some of the most interesting observations reflect the major consumer trends that we see progress year after year. However, this survey is also unique as it indicates some important changes in trends helping shape our thoughts on what the year could bring across different consumer sectors.
In the report, we examine long-term trends affecting UK consumer sentiment and highlight 13 stock ideas across Food Producers, Food and Non-Food Retail, and Travel and Leisure. Clients of HSBC Global Research can access the full insights from the following link…
Full report
?? UK: Anatomy of the consumer 2025 – Cautiously looking up | https://www.research.hsbc.com/R/84/blVzPKnnDbG7F7?
So, there you have it, the main thematic talking points for this month. But there’s still plenty more to discuss. Clients can see the rest of our talking points in our full report below.
FULL TALKING POINTS REPORT ?? https://www.research.hsbc.com/R/84/TxpQKq9nDbG7F7?
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Thanks David May! I like the nuanced discussion on how elevated trade risks could prompt China to implement stronger stabilisation measures and structural reforms. A thought-provoking read that highlights the complexities of global trade dynamics. Will drop you a note for a catchup.