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Hong Kong economy
OpinionHong Kong Opinion
Regina Ip
Regina Ip

Opinion | Never mind Trump’s trade war. Hong Kong is pulling ahead

Amid the global turmoil and underlying uncertainty, Hong Kong has stood out as an oasis of certainty

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Pedestrians walk past an electronic display of the Hang Seng Index in Hong Kong on July 11. Photo: AFP
Regina Ip
In a recent interview, Secretary for Commerce and Economic Development Algernon Yau Ying-wah hit the nail on the head in pinpointing uncertainty as Hong Kong’s greatest economic challenge. “The biggest challenge is there are many uncertainties, because the US and China trade negotiations are ongoing. Not until the time when everything is settled, [will] the case become clearer,” Yau said.
United States President Donald Trump’s new tariff rates on dozens of trading partners that came into effect on August 7 – ranging from 10 per cent for the United Kingdom, 15 per cent for the European Union, Japan and South Korea, 19 per cent for Malaysia and Indonesia and 20 per cent for Taiwan, Vietnam and Bangladesh to 40 per cent for Myanmar and 50 per cent for India (with 25 per cent effective from August 27) – injected a modicum of stability into the global trading system.

But even though the “reciprocal” tariff rates are settled – at least for now – the US’ trading partners remain vulnerable to additional tariffs on strategic or key sectors such as semiconductors, steel and cars, and to further tariff threats intended to prise open domestic markets and coerce investment in the US.

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As the rare country that responded to Trump’s tariffs with an eye-for-an-eye reprisal and achieved a prolonged pause in the trade war, China has given the world a textbook demonstration of the 19th century concept of realpolitik, the framing of policy and international relations based on bare-knuckle pragmatic considerations. The reality is the US desisted from imposing a de facto trade embargo on China because of China’s chokehold on critical minerals.

Eight months since Trump took over the White House, the US’ brazen protectionism and unilateralism have laid bare the futility of the rules-based, multilateral trading system. Deals have been made at the pleasure of the president either through flattery and lobbying by state leaders or, in the case of China, deployment of hard power. The international trading system has entered an unprecedented era of strongman politics and erratic deal-making.

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Wider uncertainties loom on the financial front. The US’ unsustainable national debt, the frothy stock markets, the president’s interference in independent monetary policymaking, plus the persistent threat of inflation despite a slowing US economy could combine to unleash a market crash, as has been warned by notable economists. Although financial markets have shrugged off these concerns, if fundamental issues are not handled properly, another financial tsunami cannot be ruled out.

04:12

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