How to Trade Internationally?

What is International Trade?

International trade is the exchange of goods and services between countries. For example, the United States might import cars from Japan while exporting textiles to Germany. This exchange enables nations to access products not readily available domestically.

How does international trade work?

International trade works through trade agreements and regulations that ensure fairness. Countries trade to access products not available locally, or to sell what they produce in surplus. Payments can be made using various currencies, with exchange rates determining the value.

We speak to Stefan Johnson, Business Development Manager for Global Trade Solutions at HSBC UK, who cuts through the noise and shows the key steps to getting started on your journey to global trade.

Gone are the days when trading overseas was the preserve of big businesses says Stefan. “Today, technology and the global reach of banks like HSBC, means that times have changed, and small businesses too can leverage imports and exports to help them grow.” But, while the mechanisms to achieve that are readily available and the potential for businesses to reach more customers, spread risk and improve profit margins are clear, Stefan agrees that “it can also appear quite daunting”.

Why do businesses trade internationally?

International Trade can expand your customer base, access new markets, diversify offerings, reduce costs, and leverage favourable conditions. For example, a product producer might find increased demand in overseas markets.

However, it's not without challenges—fluctuating exchange rates, cultural barriers, or logistical issues. Successful mitigation involves thorough market research, careful planning, and strategic partnerships. Despite the complexities, international trade is thriving, providing vast opportunities for businesses ready to navigate its waters.

From Johnson’s experience of supporting small and medium-sized businesses to start and grow their overseas trade, he shares some key insights on how you can overcome the challenges, secure the benefits and help your business unlock the opportunities of global trade.

11 Steps to Trade Internationally

1. Create strong foundations. “Establish yourself in your home market,” he says. “That gives you a deep understanding of your business and a secure base for expansion.”
2. Think about what you want from global trade. “Are you looking to reduce your production costs by sourcing materials more widely,” says Stefan, “or increase sales by accessing more customers? Or perhaps you could iron out some of the seasonality of your business, like one of our footwear customers, who has expanded sandal sales from the UK to the Middle East so that they can continue moving stock even during geographical quiet seasons.”
3. Build international Trade Relationships. “Building relationships with foreign companies and with banks and other institutions helps create a strong network,” says Stefan. Trade events can be a good starting point he explains, recalling one food sector customer who met a distributor from a large chain at a trade show. “Off the back of that conversation, they started selling into that retail chain, who loved the product so much that they decided to sell it in their stores in other countries. Having a good product and building relationships opened doors to new markets for them.”
4. Seek information. UK Export Finance (UKEF), the Department of Business and Trade are good sources of information and support, which can put you in a strong place when it comes to exploring options and negotiating terms says Stefan. “While smaller businesses might not have the same leverage when it comes to negotiations, understanding your options around trade finance, credit protection and the use of guarantees, can help level the playing field.”
5. Understand your trading market. While it’s great to get your boots on the ground, there’s a lot of desk research that can be useful. “It could be as simple as understanding local time zones,” says Stefan, “but in some markets, a failure to understand local rules could be costly, so reaching out for advice from your bank, chamber of commerce or accountant will be worthwhile.” Trade Expos or country guides can be a good starting place.
6. Understand currency payments. “Foreign exchange can feel like a risk, but careful planning can help to reduce that,” he points out. “Understand what currency you need to make or receive payments in, and what steps you can take to reduce exposure to any volatility.” With recent supply chain challenges, Stefan says that more and more UK businesses are looking to diversify their supplier risk. “We’re seeing businesses that have previously always purchased from the UK now looking to ship from Turkey or China, for example and it can look attractive from a currency perspective too, but businesses also need to factor in any change in the future.”
7. Think about your whole trade cycle. “There may be opportunities to streamline your trade cycle,” says Stefan. “If, for example, you currently import goods from Europe, they sit in a warehouse for three to four months, and then you ship them to Germany, you’re potentially looking at double duty, coding the stock, as well as paying to store and ship it. One customer, for example, found a supplier in Turkey who will ship directly to their customer in Germany. Goods go overland so there’s reduced cost and less risk of extreme weather events, there’s no customs impact and no exchange rate concerns as everything is in Euros.” Speaking to an accountant or tax advisor can help you review your options and support smoother trade. “
8. Build a sustainable trade cycle: “We have seen examples of Business Banking and Mid-Market Enterprise clients coming under pressure from large buyers/suppliers to improve their ESG credentials, and in some cases they have been cut out of supply chains. As such there is also a benefit in reviewing a sustainable trade cycle as it can assist in strengthening positive impact on reputation and credibility,” says Stefan. “Providing greater resilience to market disruption caused by climate change can also help you gain access to a more diverse pool of investors, particularly those seeking investment with a positive environmental or ESG focus.”.
9. Explore different models. You don’t have to have a big office or a big warehouse or large-scale infrastructure to trade, just a product or service that others want. “A growing number of customers are building relationships with third party warehousing or logistics providers and they’re essentially working from home with a couple of members of staff and growing their business through a streamlined process,” says Stefan.
10. Keep an eye on the rules. Rules change but working with the right advisors can help keep you on the right track, so you can understand how they affect your business and whether you can adapt to address them. “Think about policy and standards holistically, especially in relation to how the path to a net zero transition will impact your business,” says Stefan. The momentum around this is accelerating and is causing many businesses to require heavy investment in new tech/equipment. Many businesses are aware why and how rules are changing but sometimes lose sight of ‘when’ which can subsequently cause unnecessary pressure/demands or in some cases hefty penalties.
11. Ask for international trade support. “A lot of businesses avoid expanding because they think exporting or importing is confusing and time-consuming, so they stay in their lane,” says Stefan. “And it’s a shame because there’s so much growth potential. The challenges you may think are overwhelming can be easily managed with the support of partner organisations, like your bank or UKEF, which is freely available. So don’t miss out on the chance to strengthen or grow your business.”

The Department for International Trade (DIT) can help your business to grow in new markets. Visit great.gov.uk to:

• create an export plan
• identify high-potential markets for your products
• access free online lessons to build your knowledge of selling internationally
• search and apply for live export opportunities
• explore e-commerce options and support to sell online internationally, and
• explore finance and insurance options from UK Export Finance.

Other support on offer includes:

• Tailored export support – you could receive bespoke help from your local trade office
• UK Export Academy – a free, comprehensive training offer featuring masterclasses, mentoring and roundtables, events – register for seminars, workshops and trade shows at events.great.gov.uk
• UK Tradeshow Programme – you can apply for help to attend, or exhibit at, overseas trade shows and conferences, potentially including grants to offset some costs
• Export Support Service – a single point of contact to help you export to Europe, available at gov.uk/ask-export-support-team and on 0300 303 8955
• Internationalisation Fund (England only) – English businesses may be eligible for a grant of up to £9,000 to offset costs associated with exporting, including market research, translation and social media.