Hong Kong’s export slump hits three-year low in June 2019 due to US-China trade war and drop in local consumption

Hong Kong’s exports in June plummeted at the fastest rate in more than three years under the shadow of the US-China trade war.

June’s overall export figures dropped 9 per cent year on year to HK$309.6 billion (US$39.6 billion). Exports to Asia were also down by 8.4 per cent.

Posting at HK$1.89 trillion, the city’s total export figures fell 3.6 per cent in the first half of 2019, compared with the same period last year.

Financial Secretary Paul Chan Mo-po said on Thursday the sharp fall in the overall export figures last month was linked to the US-China trade war, while local consumption had also dropped.

“By the end of this month, we will announce the initial GDP estimates for the second quarter. We will review how to adjust this year’s GDP growth altogether,” he said.

A government spokesman has said the trade dispute and a soft global economic environment have put further strains on manufacturing activities and trade flows in Asia.

In June, Hong Kong’s year-on-year exports to Thailand and mainland China also dropped 13.6 per cent and 10.6 per cent respectively.

“Exports to most major markets recorded declines of varying degrees,” he said.

“The near-term performance of Hong Kong’s merchandise exports will remain constrained by the softening global economy and uncertainties arising from US-mainland trade tensions and other external developments.”

Hong Kong, China shares fall on trade worries

China, the world’s second-largest economy, has been the target of increased tariffs by US President Donald Trump for more than a year, with Chinese goods worth more than US$250 billion now covered by 25 per cent tariffs.

Though Hong Kong remained protected by a separate economic arrangement under the US-Hong Kong Policy Act, the local trade sector could not escape unscathed. The pact was enacted in 1992 based on the principles of the Sino-British Joint Declaration ahead of the handover of Hong Kong’s sovereignty to China in 1997.

Its overall monthly merchandise export figures fell for the eighth straight month since last November.

The 9 per cent decline in exports last month was the lowest rate since February 2016, when the figures slumped by 10.4 per cent.

Bilateral trade tensions between US and mainland China run high despite a tariff ceasefire agreed by Trump and President Xi Jinping at the end of the G20 Summit in June.

Shanghai Commercial Bank head of research Ryan Lam Chun-wang said the weak export figures for June were expected, but the magnitude of the fall was worse than an earlier market prediction of a 6-per cent drop.

Lam said the market had learnt there would be positive progress over the trade war in June, so there had been no need to rush exports.

He foresaw the city’s overall export figures to fall 3 to 6 per cent in the next few months and a 4 per cent drop for this year.

Headwinds force StanChart to lower city growth outlook

Meanwhile, White House senior economic adviser Larry Kudlow has confirmed a senior US official will travel to China for the first face-to-face meeting of top negotiators since the two world leaders agreed late last month to restart trade talks.

A US official said on Tuesday that American trade representative Robert Lighthizer would travel to Shanghai to meet Chinese officials next week. Chinese Vice-Premier Liu He and Commerce Minister Zhong Shan will lead the talks for Beijing.

Confidence in Hong Kong’s business environment among small and medium enterprises has dropped significantly, as the Standard Chartered Hong Kong SME Leading Business Index for the third quarter plummeted 7 points from the previous three months and stood at 39, hitting a three-year-low.

Kelvin Lau, economist with Standard Chartered Hong Kong, said the fall in the latest index figure was expected as the trade dispute deteriorated since the announcement of the index for the second quarter.

He welcomed the agreement between the US and China at the G20 Summit, saying it should help reduce downside risk from the trade dispute.