Trump penalises Hong Kong even though US has trade surplus

Mark Pinkstone/Former Chief Information Officer of HK government

US President Donald Trump has started an international biased war on trade; biased in a way that places like Hong Kong are being penalised even though they have a deficit trade balance with the US.

The US goods trade surplus with Hong Kong was US$21.9 billion in 2024, a 7.6 per cent increase over 2023.

Yet, Hong Kong has long been considered a separate customs territory from the mainland of China as stipulated in the Basic Law and by the World Trade Organisation (WTO) before and after the Handover in 1997. It also enjoyed preferential treatment from the US in terms of trade and economy under US law since 1992. But Trump put an end to that with an executive order in his first term of office in 2019 when he sided with the rioters in Hong Kong.

Total goods traded between the US and Hong Kong last year totalled US$33.8 billion. US exports to Hong Kong were US$27.9 billion while Hong Kong exports to the US totalled only $6 billion, thus the near US$22 billion surplus in favour of the US.

By wrongfully lumping Hong Kong’s trade figures with that of the mainland, Hong Kong is being penalised by the US for something it hasn’t done.

Trade lecturer at City University of Hong Kong, Julien Chaisse, has been quoted in the local press as saying “Hong Kong is in a tough spot. The US no longer treats Hong Kong as a separate from the mainland, which strips away any trade advantages we once had.”

Hong Kong has, naturally, lodged a complaint against the US with the WTO. A spokesman for the Special Administration Region (SAR) Government of Hong Kong, said “The US measures are grossly inconsistent of the relevant WTO rules and ignore our status as a separate customs territory as stipulated in Article 116 of the Basic Law and recognized by the WTO.”

The HKSAR Government will formally launch procedures in accordance with the WTO Dispute Settlement Mechanism against the US’ unreasonable measures to defend our legitimate rights.

However, although the WTO is an independent body it is currently being controlled by the US.

Traditionally the Appellate Court of the WTO adjudicates disputes between member states, but it is currently composed of only one judge. In normal circumstances, the court has seven judges, but a minimum of three is required for a quorum. The appellate body fell to one judge on December 10 last year when member states failed to make new appointments. That in turn has halted all appeal judgements on trade matters until a new solution is reached. Also, the US has  threatened to block the  body’s budget.  So, even though both China and Hong Kong, plus many other member states, have lodged complaints against the US for its tariffs war, very little can be done until more judges are appointed. And that could take ages as such appointments will continue to be blocked by the US.

It is well recognized that there are no winners in trade wars, and it is the little man, the man in the street who suffers as the tariffs are passed down the line to the consumer, thus causing inflation to rise. But Trump thinks nought for the little man, only himself.

The Chinese ambassador to the US, Xie Feng, also believes there are no winners in trade wars nor in wars over science, technology or industry. Differences, he said between the two nations should be the driving force for exchanges and mutual learning rather than “the excuse for rejection and confrontation and that successes of each were opportunities for the other.”

On the sidelines of last week’s National Peoples’ Congress in Beijing, China’s commerce minister Wang Wentao, hit back at Trump saying that coercion and threats would not work on China, nor would they scare China. “China’s determination to defend its own interests is unswerving. There are no winners in a trade war.

“If the American side goes further down this wrong path, we will fight to the end,” he warned.

China is the main trading partner in 140 countries and has free trade agreements (FTAs) with 30. And it is ready to sign even more FTAs to minimize the impact of restrictions imposed by the US.

So, China as perhaps the world’s largest trading partner and a key cog in the supply chain mechanism, the US bullying tactics would have little impact on China’s Gross Domestic Product by as little as 1 per cent, even if the tariffs went as high as 60 per cent.

Mark Pinkstone

** The blog article is the sole responsibility of the author and does not represent the position of our company. **

Academics proclaim that in tariff wars there are no winners, all economies fell. True, but the current “war” is not about economics, as it started out to be, but a personal vendetta by US president Trump against China’s president Xi Jinping.

Trump started the war by imposing trade tariffs against all of its trading partners. There were no exceptions, even for those, like Hong Kong and Australia, who had deficits with the US.

Even though Hong Kong is a member of the World Trade Organisation (WTO) in its own right, Trump lumped Hong Kong under the broader China umbrella and imposed tariff hikes totalling 145 per cent against all products exported to the US. The rest of the world faced a base-line levy of 10 per cent. And this is where Trump’s plan became personal.

Trump’s plan was for the world to kowtow to him and acknowledge that he was the world’s leader. Most did, although there has not been any announcement of any deal being struck anywhere. And then came China’s Xi Jinping, who refused to kowtow, vowing to “fight to the end” and upped the ante of tariffs on US goods imported into the mainland.

Economies were floundering and markets were weak. Trump took advantage of the low market and after announcing exemptions for his billionaire club, while the rest of the population suffered, it appeared that he had made a deliberate gesture to manipulate the stock markets by declaring a 90-day pause in the tariffs. “Be cool” Trump wrote just hours before announcing the pause. “This is a great time to buy!” This was white collar terrorism in plain sight.

Global markets rose rapidly with the Hong Kong Stock Exchange up 51.17 per cent. But that bottomed out the following day amid rumors Trump was to declare martial law to police the southern border with Mexico.

The manoeuvre could have been taken from his book “How to make a deal”. Except it is not his book as he often boasts. The book was written by ghost writer Tony Schwartz who wrote in The New Yorker “Trump’s tweet that he has written bestselling books is one more deceit and delusion. He is incapable of reading a book, much less writing one.”

While Trump sits in the Oval Office contemplating how he can outsmart Xi, the Chinese president has been busy shoring up free trade deals in Vietnam, Malaysia and Cambodia. In all three South East Asian countries he was warmly greeted as a dear friend. Of the three, Vietnam is the hardest hit with a 43 per cent tax on its exports to the US.

Trump’s racist slurs against all things Chinese were compounded during the trade war when he threatened to delist Hong Kong and mainland stocks from all US exchanges – the New York Stock Exchange, Nasdaq and NYSE American. It is estimated there are 286 mainland and Hong Kong stocks with a market capitalization of US$1.1 trillion listed in the US.

And again, Trump has miscalculated his “punishment.” All companies delisted in the US will simply come to Hong Kong as their secondary and dual primary listing to raise funds and boost our Initial Public Offering (IPO) market.

Hong Kong’s financial secretary, Paul Chan Mo Po, is bullish about the outcome of the war, with Hong Kong becoming stronger as a leading fundraising hub and with enhanced trade ties with the Asia-Pacific and Middle East regions.

But Trump is not stopping there and he’s trying every possible means to curtail China’s position on the world stage. After taking over control of the Panama Canal to tax mainland and Hong Kong ships passing through the waterway, he now plans to tax every ship made in China, regardless of its registration, when they visit US ports.

The actions by Trump have done more harm to himself than to the countries he targeted. In the eyes of world leaders, he cannot be trusted and trading with him in the future will be for essentials only. The harm he has done to his country will take years to repair, and those who voted for him will surely be more prudent when the next elections come about. He has failed miserably with his campaign policy to “Make America Great Again.” He has done exactly the opposite.