Kwok Yip-biu’s container truck is these days tucked away in a car park deep in the New Territories, near Hong Kong’s border with mainland China. Until a few months ago, the 58-year-old driver hauled about 30 containers across the border each month. Six days a week, Kwok delivered cargo from the factories around Shenzhen to Hong Kong’s bustling Kwai Tsing Container Terminal, where it was shipped overseas. Some months, he said, he had more work than he could handle. Since the US-China trade war intensified in September, Kwok’s work has slowed to a trickle. In February, he made only one delivery. The 100 spaces in the car park were now half-full with idle trucks. Kwok looked over the scene and reflected that in his 37 years as a cross-border driver he had never seen business so slow. “Look at this car park, it is like a car show now. If business was normal, you wouldn’t see any of these vehicles here on a weekday morning,” he said. “The trade war has hit factories on the mainland hard, and as a result our lives have been affected too.” Kwok’s lament and thousands like it echoed across Hong Kong as the city’s workforce was caught in the crossfire of the US-China trade war . Hong Kong’s trade sector employs about 478,000 people, or 12 per cent of the city’s total workforce, and contributed 17.7 per cent to its economy in 2017. Chan’s budget offers boost for businesses looking abroad for new markets Some 43 per cent of Hong Kong’s total trade consists of re-exports going between mainland China and the US, according to the US government. Secretary for Commerce and Economic Development Edward Yau Tang-wah estimated that in 2017 nearly half of all the products China exported to the US went through Hong Kong. Container trucks like Kwok’s are a key part of the interconnected supply chains that link mainland China to Hong Kong and the US. Like all the trade workers along those chains, Kwok felt the bite in September when Washington imposed 10 per cent tariffs on US$200 billion worth Chinese goods, including clothes, hats, shoes, food, tobacco and textiles. The tariffs were expected to jump to 25 per cent on March 1, but President Donald Trump extended a truce on February 25. There had been other signs of hope: on Friday, Trump said he had asked China to immediately remove all tariffs on US agricultural products because trade talks were progressing well. And ahead of the meeting of the Chinese People’s Political Consultative Conference that started on Sunday , Guo Weimin, spokesman for China’s political advisory body, said negotiators from China and the US were working on the next steps to end the trade war. But no one, it seems, knows how long the trade war will last or exactly how to proceed. Separate US trade policy for Hong Kong will not end, envoy says Hong Kong, as a special administrative region of China, is shielded by an American trade arrangement called the Hong Kong Policy Act. This means the city is exempt from any tariffs the US imposes on China. Still, Hong Kong remains vulnerable, and especially so when it comes to US-China trade . Some of Hong Kong’s biggest players in the trade sector took precautions. The city’s largest container terminal operator, tycoon Li Ka-shing’s Hutchison Port Holdings Trust, decided in January to freeze pay rises for more than 1,000 staff at the local container port terminal unit Hongkong International Terminals. Some logistics firms contemplated lay-offs and pay cuts. Yau said signs emerged of the trade war eating into Hong Kong’s economic health in the last quarter of 2018. He said the damage would continue in the first three months of this year. US, China reportedly in final stages of completing trade deal “Hong Kong must get prepared,” he said. The city’s medium- to long-term outlook depended on whether Trump and President Xi Jinping signed a deal, he added, and whether the existing tariffs would be cancelled. Overseas shipments from Hong Kong were flat in the fourth quarter of last year, a marked slowdown from 6 per cent growth in the third quarter. Retail sales growth slowed to 2.1 per cent from 12 per cent, according to the government’s latest statistics. Hong Kong’s gross domestic product grew by 3 per cent last year, the slowest rate in two years and at the low end of the government’s 3 to 4 per cent estimate. More bad news surfaced late last year when Hong Kong dropped out of the world’s top five busiest container ports. According to London-based Drewry Shipping Consultants, Hong Kong is now seventh, after Shanghai, Singapore, Ningbo, Shenzhen, Guangzhou and Busan of South Korea. Gerry Yim Lui-fai, chief executive officer of Hutchison Port Holdings Trust, said trade would continue to slow in the first quarter of this year. Modern Terminal, which operates seven berths at the Kwai Tsing Container Terminal and several ports in the western Pearl River Delta, anticipated reduced trade volumes for as long as the trade war drags on. “The global supply chain is so interconnected today that any trade dispute between the two largest economies will ripple across all trade lanes and this will eventually impact Hong Kong,” said Peter Levesque, the company’s group managing director. Carlos Hung Chun-ngai, director general of the Union of Hong Kong Dockers, said that most of the 5,000 dock workers at the nine container ports at Kwai Tsing had endured tough times in the past few months. “Many [dock workers] are paid on a daily basis and have already taken up part-time jobs to make a living.” Carlos Hung, director general of the Union of Hong Kong Dockers “Many of them told us their work days are one-third fewer this year to date compared with the same time last year,” Hung said. “Many are paid on a daily basis and have already taken up part-time jobs to make a living.” He added the union was collecting opinions from its workers before proposing a pay rise for this year. “To be honest, we need a pay rise at least to cover inflation,” he said. Last year’s underlying inflation grew 2.6 per cent and the government estimated this year’s rate would be 2.5 per cent. The biggest damage so far, in the words of Nicholas Kwan Ka-ming, the research director of the Trade Development Council, was to tens of thousands of Hong Kong manufacturers working across the border. “Many of them who have not been caught by the tariffs fear they will because of the uncertainty arising from the trade war,” Kwan said. “They either dare not take orders or hastily ship products after taking orders.” Elsa Yuen May-yee, president of the Hong Kong Logistics Association, estimated that orders in the logistics sector were likely to drop by at least 30 per cent in the first quarter of 2019, a drastic downward trend unseen in years. “This is the final week of February but it is so quiet that it is like the Lunar New Year holiday is not over yet,” said Yuen, also director of KDS Global Logistics. “Some logistics firms are considering lay-offs and pay cuts.” She predicted Trump and Xi would have lengthy talks before any potential deal, meaning uncertainty could easily spill into the second quarter of this year. Rick Helfenbein, the Washington-based president of the American Apparel and Footwear Association, which represents more than 1,000 major brands, said damage was already done to bilateral trade. Everybody wants to see this whole tariff debacle go away. Many companies are reducing their exposure to mainland China Rick Helfenbein, president of the American Apparel and Footwear Association “Everybody wants to see this whole tariff debacle go away,” he said. “Many companies are reducing their exposure to mainland China.” He said that for the merchandising season ending in February for delivery in September, US importers were sourcing from other countries such as Vietnam, Bangladesh and Indonesia, despite mainland China’s established supply chain. This means potentially fewer shipments and re-exports of products running between mainland China and the US through Hong Kong. He said the US imported 41 per cent of clothing, 72 per cent of footwear and 84 per cent of accessories, such as bags, from China. “There is what we call ‘bumper cars’ in China, when bigger producers would force smaller players out to other countries such as Vietnam, which among other things would create inflation for the US importers,” he said. “When [US importers] source products outside China’s sophisticated supply chain, they are exposed to high risks of things going wrong in terms of quality control, and compliance with environmental protection and human rights.” Not everyone was entirely pessimistic. Allan Zeman, who spent 35 years in the clothing supply chain business, said he expected China and the US to ultimately work out a deal. “Both sides need it, but the US needs it more,” he said. “Trump imposes tariffs on Chinese goods and he thought China is paying the tariffs, but it is American consumers who will have to pay for it.” Will Hong Kong budget offset gloomy growth forecast? And Jimmy Kwok Chun-wah, chairman of the Federation of Hong Kong Industries, said the trade war had pushed many Hong Kong entrepreneurs to look beyond the US market. “We don’t know when or what Trump will do with mainland China. But the reality is Hong Kong companies need to branch into new markets such as Asean,” he said. “An easier starting point is for markets to have free-trade agreements with Hong Kong.” Hong Kong so far reached several free trade deals, with the member states of European Free Trade Association and Asean, as well as New Zealand, Chile, Macau and Georgia. Free-trade talks have also been held with Australia and the Maldives. The city has moved to help its small and medium-sized enterprises weather the trade war. Last week, Financial Secretary Paul Chan Mo-po said the government would pump HK$1 billion into an existing matching fund, the Dedicated Fund on Branding, Upgrading and Domestic Sales, to subsidise companies upgrading their products for sale abroad. The fund has now grown to HK$3.5 billion since last August, when the trade war intensified. But back in the car park in the New Territories, Kwok Yip-biu said the factories he worked for in mainland China had received far fewer orders in the past months. The fallout had been devastating, and not just to the container truck business and its drivers. The decline in trade was forcing the closure of a small restaurant in the car park where owner Ng Win, 61, had been feeding drivers for 13 years. “There used to be 300 drivers eating here every day before the trade war. But now the number has gone down to 100,” Ng said. “The business has lost money for several months and it has now come to a dead end.”