Trade war expected to cause biggest drop in ten years

THE Hong Kong Trade Development Council (HKTDC) has forecast that the city’s exports this year would suffer their largest decline in a decade due to the impact of the ongoing trade war between China and the United States.

The trade promotion body predicted that the city’s exports would shrink 4 percent by value, the worst performance since 2009 when they plunged 12.6 percent during the depth of the global financial crisis. The forecast marked a significant downgrading of a previous prediction that exports would grow 2 percent in 2019, reports the South China Morning Post.

The outlook came on the same day China’s Customs Administration published a detailed breakdown of trade figures showing that shipments from the mainland to Hong Kong fell 7.7 percent in the first eight months of this year, compared to the same period in 2018 – a faster rate of decline than the 6.3 percent drop in the first half of the year.

China’s overall overseas shipments rose 0.2 percent between January and August, indicating a weakening of Hong Kong’s role as a primary conduit for Chinese transshipments to end consumer markets in the US and European Union.

China-US trade war

The research director for HKTDC, Nicholas Kwan said the China-US trade war was the biggest reason for Hong Kong’s gloomier export outlook. “The trade war has not only affected our exports to the US but other markets such as Japan, Taiwan and even Vietnam,” he said.

The city is also facing uncertainty as the US Congress tries to tie its preferential trade treatment to its human rights record amid continuing anti-government protests, Mr. Kwan noted.

US lawmakers are attempting to push through the Hong Kong Human Rights and Democracy Act, a bipartisan bill that would require an annual review of the special treatment Washington affords the city – including special trade and business privileges – under the US-Hong Kong Policy Act of 1992.

“This is a political issue, but we hope the US understands that we are still one of the world’s few free ports,” Mr Kwan said, playing down the US threats.

“Even if we lose the special trade status, I don’t think Hong Kong will be disappointed and in distress because over 90 percent of goods we sell to the US are made elsewhere. And the US exports more goods to Hong Kong than we sell to them, which means cancelling the special trade deal is not in American interests at all,” he said.

The Trade Development Council’s quarterly export index, based on a survey of 500 traders in Hong Kong, tumbled to its lowest level since the first quarter of 2009 amid the gloomy prospects for the city’s exports in coming months. The index fell to 27.4 in the third quarter from 37.3 in the preceding quarter.

A majority of traders surveyed said that the biggest immediate impact of the trade war had been a drop in the size of export orders, followed by stiffer bargaining over export prices. To mitigate the risks arising from the trade war, 45.3 percent said they would work to develop export markets outside the US.