Warning sounds as Beijing fires back in damaging trade war
With China and the United States being major trading partners, Hong Kong stands to suffer both as an entrepot and a financial centre if confrontation affects economic stability
US President Donald Trump has made the first move in a mutually destructive trade war with China that threatens to engulf other economies and wreak collateral damage, including in Hong Kong and elsewhere.
Any doubt that the threat is real should have been quickly erased by retaliation from Beijing to the US leader’s plan to impose tariffs of US$60 billion on Chinese imports, on top of levies on steel and aluminium shipments.
Beijing has targeted tit-for-tat tariffs on agricultural products, for which China is the biggest market, and put pressure on politically sensitive states that voted for Trump, ahead of midterm congressional elections later this year.
This newspaper has made clear its position that a trade war would be bad for everyone, not least US workers and consumers.
The folly is compounded by the fact that Trump is not fighting smart. He may have accused China of technology theft and US and European hi-tech companies may have legitimate concerns about being forced to share technology before being allowed to operate on the mainland.
But his plan to bring a case against China at the World Trade Organisation needs wider support; a 25 per cent tariff on Chinese products could damage domestic industry and agriculture; and the administration already has the power to ban Chinese firms investing in the US from acquiring technology and talent.
Tariffs are at once a double-edged sword and a blunt tool in trade disputes, which account for the sharp falls on stock markets since Trump’s announcement.
With so much integration, the US will find it hard, particularly in the tech sector, to surgically damage Chinese companies without affecting its own businesses and those of allies.
The hi-tech race is seen by both sides as integral to national security. To the United States, Beijing’s “Made in China 2025” campaign to upgrade the country’s industrial sector is a blueprint for transforming it into a hi-tech driven manufacturing superpower that will erode US core competitive advantage.
The European Union, too, and particularly Germany, see the challenge, but tend to have a more rational understanding of China’s desire for high-end products, and focus on the need for fair competition.
The American action seems driven by a collective anxiety, particularly among the elite, about China replacing the US, and about safeguarding the core hi-tech competence on which its economic and military dominance rests.
With China and the US being major trading partners, Hong Kong stands to suffer both as an entrepot and a financial centre if a trade war affects economic stability.
Secretary for Commerce and Economic Development Edward Yau Tang-wah says it is unlikely at this stage that trade tensions will trigger a downturn in Hong Kong. But investors and consumers need to be prudent.