US-China trade breakthrough ‘could signal the worst is over’ for Hong Kong, says commerce chief Edward Yau

Kanis Leung

Friday’s trade war breakthrough between China and the US could mean the saga is bottoming out, signalling a more positive economic outlook for Hong Kong, the city’s commerce minister said on Saturday.

Secretary for Commerce and Economic Development Edward Yau Tang-wah hailed the phase-one deal – that would halt further tariff increases and lower some already in place – as good news for a local economy brought low by the trade tensions and recent political strife.

But he said that only after “existing high tariffs” were cancelled could certainty be restored for trade between both sides and Hong Kong, whose traders frequently act as middlemen in import and export between the world’s two biggest economies.

“The deal still hasn’t been signed. Practically, the tariffs still haven’t reversed. So it’s too early to say there will be an immediate recovery for the global or regional economy,” Yau said.

Edward Yau said the phase-one deal “helps next year’s economic outlook”. Photo: Edmond So

“But looking ahead, when it can bottom out and be relieved gradually with cancellation [of the tariffs] step by step, this helps next year’s economic outlook.”

The minister noted that the dispute – nearly 18 months in – had harmed trade, slowing GDP growth. Last year, GDP increased by 3 per cent from 2017, but that figure had fallen to near zero by early 2019.

The city has since slipped into technical recession, though that was chalked up to an ongoing wave of anti-government protests.

After more than a year of trade tension, Beijing and Washington announced on Friday they had reached a consensus covering a wide range of issues, including intellectual property protection, technology transfer, purchase of agricultural products and expanding trade.

Aviation rebound contingent on US and China ending trade war, says IATA

The US cancelled a 15 per cent tariff scheduled to come into effect on Sunday on about US$160 billion of Chinese goods.

According to the US trade representative, an existing 15 per cent levy on about US$120 billion of Chinese imports will be cut to 7.5 per cent, while a 25 per cent tariff will remain on about US$250 worth of goods from the country.

Chief Secretary Matthew Cheung Kin-chung said Hong Kong would benefit from a deal, but cautioned that would depend on the implementation.

Local businesspeople and union leaders echoed the sentiment.

“Businesses’ exports of goods after Lunar New Year will be more stable,” pro-business legislator Felix Chung Kwok-pan said.

The Liberal Party leader said China had made a great concession on the matter, while US President Donald Trump had not.

“It’s just halving the extra tariff and still charging 7.5 per cent. But this could somehow be made up partially by the depreciation of the yuan,” he said.

Hong Kong Small and Medium Enterprises Association president Pam Mak said the suspension of the new tariff plan at least could ensure companies would keep existing orders, while the reduction of duties could help manufacturers who failed to explore other markets throughout the past year.

Hong Kong’s economy has been badly battered by the trade war, as well as domestic unrest. Photo: Nora Tam

“Even though they can’t have new markets, they don’t need to plan for a shutdown,” she said.

Economist Andy Kwan Cheuk-chiu, director of the ACE Centre for Business and Economic Research, said the deal could stabilise trade. But he said the tariff spat was having less of an effect than the protests, which have gripped the city for more than six months, battering key industries such as tourism and retail.

He said that, if there is no resolution to the political crisis, the city’s economy could still struggle in 2020.

This article US-China trade breakthrough ‘could signal the worst is over’ for Hong Kong, says commerce chief Edward Yau first appeared on South China Morning Post

For the latest news from the South China Morning Post download our mobile app. Copyright 2019.