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Tammy Tam
SCMP Columnist
City Beat
by Tammy Tam
City Beat
by Tammy Tam

Hong Kong cannot escape the US-China trade war unscathed

Despite being an independent and free economic entity, the city will not be able to avoid being dragged into this clash of global economic titans

What is the “biggest trade war of the century” all about?

Is it purely over America’s trade deficit with China? Or is it a war for the US to contain China’s rise? Or even a war against globalisation?

Beijing and Washington apparently have just the opposite views. Then how about Hong Kong, which remains an independent and free economic entity under “one country, two systems”? Can Hong Kong try to remain neutral so as not to be dragged too far into this row? The city may once have hoped so, but that is very unlikely to be the case now.

What puzzles many Chinese is that while US President Donald Trump keeps talking of President Xi Jinping as “a great man” and his “good friend”, he has no qualms about launching this massive trade war against him. With the signs indicating a further escalation rather than an easing, the answer to the puzzle is evident: Trump’s “America first” policy takes precedence over any friendship.

As for China, besides accusing the US of trying to stop its development, the latest official line is that – more than a trade war between the two most important global economic powers – this is a war against the world’s free-trade system, a set-up ironically initiated by the US decades ago.

That narrative signifies a shift in the Beijing leadership’s thinking. After negotiating hard with the US in the hope of a last-minute reprieve, regardless of how slim the chance, China now is apparently not only deeply disappointed but must have come to realise the inevitability of this trade war. And that it will be a long one – a reality that is hard to swallow but cannot be changed.

The old Chinese saying, “It rains when heaven deems fit, mother remarries when she wants to”, aptly describes the inevitability and acceptance of it all in this situation.

However, by asserting that the US is waging a “world war” against globalisation, Beijing has a better reason to try to convince others to be its allies.

So where is Hong Kong in this war? The city had once hoped that, with a different economic system and its special status as an independent member of the World Trade Organisation, it could avoid bigger collateral damage, although the government was also preparing for rainy days ahead.

Thanks to a free and open economic environment, plus historic reasons, Hong Kong maintained close trade relations with the US before and after the handover of the city’s sovereignty from Britain to China. For the same reason, the US business community in town apparently doesn’t want to see the trade war spread to Hong Kong either.

Chief Executive Carrie Lam has vowed to travel overseas more to promote Hong Kong’s unique qualities. Photo: Dickson Lee
But it’s a wake-up call for Hong Kong. Over the weekend, Chief Executive Carrie Lam Cheng Yuet-ngor joined the global chorus blaming the US for disrupting the international trading order. Both Financial Secretary Paul Chan Mo-po and trade minister Edward Yau Tang-wah gave public assurances that the government would closely monitor the latest developments and assess the possible impacts before taking necessary measures.

Hong Kong is definitely not, and should never be, “just another city in China”. That’s why Lam has vowed to travel overseas more to promote the city’s unique qualities. Yau is busy working on more deals with his foreign counterparts.

But no matter how special Hong Kong’s status within China, when it comes to a trade war on a global scale – which not even long-time allies of the US such as Japan, South Korea and Europe can avoid – this city cannot hope to remain untouched.

This article appeared in the South China Morning Post print edition as: History and economics mean Hong Kong can’t escape Trump’s trade war unscathed
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