President Trump announced his administration will consider issuing sanctions on China and could lift most aspects of Hong Kong’s special trade status with the US.
This warning, which was issued during a press conference at the White House on Friday, follows trade disagreements between China and the US over Hong Kong’s partial autonomy.
Trump is mulling an executive order to end the special trade status with Hong Kong vis-a-vis gradual actions such as imposing tariffs that are similar to those in place with China, for Hong Kong. He did not announce specifics or new measures on how the US will proceed.
Despite global warnings, on May 28, China passed a national security law that increases its influence over Hong Kong. This action triggered fears by opponents, concerning the city’s loss of autonomy that has empowered the area to remain a global financial center since 1997.
The new law is expected to come into force by September 2020. It will not only allow for the avoidance of local legislature but also let Chinese intelligence agencies set up base in the partially autonomous territory. China defends the law as essential for the country’s national security and for Hong Kong’s success.
What it means for US-Hong Kong trade
With the loss of Hong Kong’s special customs territory status, tariffs and sanctions can be imposed. Total US goods and services trade with Hong Kong was almost $67bn in 2018, exports were $50bn, and imports were close to $17bn, according to reports. The US goods and services trade surplus with Hong Kong was around $33bn in 2018, the largest among its trading partners.
Hong Kong leadership warned the US that sanctions imposed on the territory will harm both parties. US has economic interests in the financial center of Asia, as Hong Kong is considered an entryway to mainland China for business and investing. Also, around 1,300 US businesses are based in the city and it is also a re-export center for US-China trades.