Trade tensions could hammer up to 2.2% of Hong Kong exports

The second round of tariffs could hit $130b worth of Chinese exports to the US via Hong Kong.

Reuters reports that Hong Kong secretary for commerce and economic development Edward Yau admitted that the second round of tariffs proposed by the United States in a tit-for-tat trade war between the world’s economic superpowers could easily hit about 2.2% of Hong Kong’s total exports.

This stands to impact roughly $130b worth of Chinese exports to the US via Hong Kong.

Also read: Trade war could cut 1% of Hong Kong's GDP

The US recently announced a 10% levy on another US$200b worth of Chinese imports just days after both nations slapped retaliatory duties on $34b worth of each other’s goods.

Also read: PMI plunges to 47.8 in May as orders dry up and costs mount

“A tariff of 25 per cent, or even 10 per cent, is no small sum in the cost of business. Somehow this cost will have to be passed on either to the production side or the consumer side. In any case, I think Hong Kong as a major trading centre will be hit hard. So we need to be vigilant,” Yau was cited in South China Morning Post.

As a small and export-dependent economy, Hong Kong is the fifth market in Asia that stands to be the most affected by US tariffs on Chinese goods via supply chains, asset management firm Schroders said in an earlier note. 

Merchandise trade accounts for 157.4% of Hong Kong’s GDP in 2017, according to BMI Research, as the SAR has long ceded the bulk of its manufacturing to the Mainland. Shipments headed to China also account for more than half of overall exports.

Finance Secretary Paul Chan also mentioned that a full blown trade war could negatively impact one in five Hong Kong jobs especially in the trade and logistics industry which employs roughly 730,000 people.

Here’s more from Reuters: