US-China trade: what a tariff removal would mean for Hong Kong firms that have invested overseas

Many factory owners have relocated some operations away from mainland China, including to Southeast Asia, as trade disputes with the United States took a toll

Even though President Joe Biden may end up lifting tariffs to curb inflation – possibly this week – there are concerns that such tariffs ‘may come back anytime’

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As the US mulls the removal of some tariffs on Chinese imports, lingering disputes between the two economic superpowers continue to cloud the outlook for Hong Kong manufacturers. Illustration: Lau Ka-kuen

Published: 12:00am, 6 Jul 2022Updated: 4:04pm, 7 Jul 2022

The possible removal of US import tariffs on goods from mainland China is expected to be a boon for business, but from the perspective of some Hong Kong manufacturers, geopolitical uncertainties are still clouding the outlook and having an outsized impact on plans.

Factory owners who used to operate exclusively on the mainland have been ramping up their presence in Southeast Asia, South Asia and even Europe since 2017 due to increasingly demanding requirements from their customers, according to the Federation of Hong Kong Industries, which represents about 2,000 members in the sector.

Through what is known as the “China Plus One” strategy – in which companies may shift some operations abroad while the mainland remains their main market – businesses have been able to better navigate the fraught business environment resulting from lingering Sino-US trade disputes.

This means that some Hong Kong manufacturers who are heavily invested in China also now rely on offshore manufacturing, at least to some degree.

The import tariffs on Chinese goods kicked off in 2018 during the former presidential administration of Donald Trump. US President Joe Biden has been mulling the possible removal of some tariffs on Chinese imports in a bid to help curb soaring inflation in America, and there are reports that a decision could come as soon as this week.

On Tuesday, Chinese Vice-Premier Liu He had a “pragmatic and frank” exchange with US Treasury Secretary Janet Yellen on economic and tariff issues, the official Xinhua News Agency reported.

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