Growing Through Import and Export

In an ever-changing geopolitical climate, import and export markets are consistently having to adjust to fluctuating economic conditions.

Regions’ Global Trade Finance team has fingers on the pulse of this volatility, as recognized by the U.S. Department of Commerce which recently honored the bank with the Presidential “E” Award recognizing its contributions to increasing U.S. exports.

Geopolitical Impact

“The geopolitical piece is the biggest influence on the international trade markets – and always has been,” noted Carson Strickland, head of Regions Global Trade Finance. “Geopolitical tensions continue to affect global trade in terms of costs, logistics and supply chain.”

The geopolitical climate has long influenced international trade, and a looming U.S. election could also come into play. There is good news for one factor that has had more headline impact on international trade since during the height of the COVID pandemic. Supply chains are normalizing, which eases some pressures, but transportation costs remain high and continue to rise, prompting some companies to look for more cost-efficient options.

His team is seeing more companies moving out of China due to production risks and rising costs.

“We’re seeing companies shifting their supply chain to other parts of Asia,” said Strickland. “This means finding new vendors, figuring out transportation, and other logistics, making the financial aspect challenging.”

Nearshoring in many cases looks at not only moving production capacity to Mexico and Latin American countries but also to the U.S., though border challenges with Mexico put an additional constraint on international trade.

“Illegal immigration issues and drug trafficking along the border could potentially impact ongoing viability of existing free trade agreements with Mexico, which is the U.S.’ second largest trading partner just behind Canada,” Strickland noted.

Strickland also pointed out that most trade with Mexico is conducted via truck or rail.

“Tighter border security could make passage more difficult and/or less efficient, which could impact logistics of shipping in or out of Mexico and make trade there more expensive and less appealing for U.S. companies,” said Strickland.

Interest Rates and Inflation

“In the current economy, inflation is front and center as companies are borrowing for working capital and interest rates are impacting prices,” said Strickland.

Higher interest rates in the U.S. are challenging profit margins for many companies, while higher rates overseas are impacting demand for U.S. products and services. In addition, U.S. companies are seeing demands for longer payment terms from customers due to the overseas rate environment.

Strickland and his team don’t expect this to change in the near term, however as interest rates eventually begin to come down and inflation risk decreases, they expect higher economic growth in international trade.

Outlook Remains Positive

According to Strickland, even with headwinds most exporters and U.S. companies in general are largely feeling more positive about the outlook for the remainder of 2024 and into 2025.

“Economies are generally strong and most feel that interest rate environment will ease – at least some – during this period,” said Strickland. “Our team is hearing from many clients involved in international trade that they are interested in growing export sales and there is sustained optimism around entering new markets.”

In more developing countries and emerging markets that are still growing their infrastructure, they are building roads, power and water infrastructure and more. Strickland’s team is seeing U.S. companies large and small competing to win business in these markets for major projects.

“This is on everything from design and site work to hiring local labor,” Strickland shared. “There is a lot of opportunity in infrastructure development around the world.”

Global Trade Finance in the News

Strickland and Bryan Ford, head of Regions Treasury Management, recently sat down with Birmingham Business Journal reporter A.J. O’Leary to share their insights on the business of exports at Regions Bank.

Ford told O’Leary that more and more companies are exporting and/or have need for some of the solutions that Regions offers through its global trade unit. He also shared an update on the International Subsidiaries Banking Group at Regions which was launched in 2023 to focus exclusively on foreign direct investment.