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Trading and logistics is one of Hong Kong’s four pillar industries. Photo: Roy Issa

US-China trade war hits Hong Kong hard, with imports and exports continuing to slide in April

  • Exports fell for the sixth month in a row, down 2.6 per cent year on year, while imports fared even worse, down 5.5 per cent on last April
  • More trouble is expected in the coming months as the headwinds of the trade war continue to buffet the city’s economy

Hong Kong felt more pain from the US-China trade war in April when exports were revealed to have dropped by a worse-than-expected 2.6 per cent on the same time last year. It was the sixth month in a row they had fallen, with more trouble expected in the coming months.

Imports fared even worse, down 5.5 per cent in April year on year, having contracted for five straight months, the Census and Statistics Department said on Monday.

ING Greater China economist Iris Pang said the April figures were far worse than what she had estimated, which was a 1.5 per cent fall in exports and a 0.5 per cent drop in imports.

“The trade war escalated in May with fresh tariffs while Huawei was dragged further into the dispute,” she said. “This means Hong Kong’s external trade will further decline, especially in exports, which could tumble by double digits in May.”

In April, Hong Kong’s exports fell to HK$321.5 billion (US$41 billion) while imports shrank to HK$356.6 billion, leaving a trade deficit of HK$35.1 billion.

US President Donald Trump raised the 10 per cent tariffs on US$200 billion worth of Chinese goods to 25 per cent on May 10, which prompted Beijing to react with higher tariffs on most of the US$60 billion worth of American goods already subject to them from June 1.

The US government last week demanded American companies obtain special permission to do business with Chinese firm Huawei Technologies, the world’s No 1 telecommunications network equipment maker.

“The electronic industry is in confusion now – it may take a month or two for companies to find out if they are permitted to do business with Huawei,” Pang said. “So we will see weaker trade in the electronics sector in the near future.”

The US-Hong Kong Policy Act gives the city special treatment in trade, customs, technology and cultural exchanges. Photo: Nora Tam

A Hong Kong government spokesman said the city’s exports were weighed down by the continuing trade war, a weakened global economy and geopolitics.

“There were weak exports observed in many Asian economies in recent months,” the spokesman said. “The near-term outlook for Hong Kong’s exports is subject to a high level of uncertainty. It will hinge, to a large extent, on how the US-China trade tensions evolve.”

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The poor trade figures will put pressure on the city’s economic well-being, with gross domestic product in the first quarter growing by just 0.6 per cent year on year. Trading and logistics is one of Hong Kong’s four pillar industries, together with financial services, tourism, and professional and producer services, which, combined, made up 57.1 per cent of Hong Kong’s GDP in 2017.

April was the sixth month in a row exports had fallen, and the fifth straight month imports had dropped. Photo: AFP

In the first four months of this year, exports declined 2.5 per cent over the same period in 2018 while imports were down 3.7 per cent, leaving a trade deficit of HK$154 billion.

Trade between Hong Kong and the US was hit hard despite the city enjoying a separate status to mainland China. The arrangement, the US-Hong Kong Policy Act, enacted in 1992 ahead of the handover in 1997, gives the city special treatment in trade, customs, technology and cultural exchanges.

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In April, Hong Kong exports to the US plunged 17 per cent, or 11 per cent for the first four months of this year.

The US is Hong Kong’s second largest export market after the mainland.

“The trade of both Hong Kong and mainland China are so intertwined that the city cannot escape the trade war,” Pang said.

The city’s imports from the US dropped 6 per cent in April but rose by 2.5 per cent in the first four months of this year. Imports from Hong Kong’s largest supplier, the mainland, fell 1.6 per cent in April and 0.7 per cent over the four-month period.

This article appeared in the South China Morning Post print edition as: Hong Kong feels more trade war pain as exports and imports continue to tumble
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