Trump penalises Hong Kong even though US has trade surplus

Mark Pinkstone/Former Chief Information Officer of HK government

US President Donald Trump has started an international biased war on trade; biased in a way that places like Hong Kong are being penalised even though they have a deficit trade balance with the US.

The US goods trade surplus with Hong Kong was US$21.9 billion in 2024, a 7.6 per cent increase over 2023.

Yet, Hong Kong has long been considered a separate customs territory from the mainland of China as stipulated in the Basic Law and by the World Trade Organisation (WTO) before and after the Handover in 1997. It also enjoyed preferential treatment from the US in terms of trade and economy under US law since 1992. But Trump put an end to that with an executive order in his first term of office in 2019 when he sided with the rioters in Hong Kong.

Total goods traded between the US and Hong Kong last year totalled US$33.8 billion. US exports to Hong Kong were US$27.9 billion while Hong Kong exports to the US totalled only $6 billion, thus the near US$22 billion surplus in favour of the US.

By wrongfully lumping Hong Kong’s trade figures with that of the mainland, Hong Kong is being penalised by the US for something it hasn’t done.

Trade lecturer at City University of Hong Kong, Julien Chaisse, has been quoted in the local press as saying “Hong Kong is in a tough spot. The US no longer treats Hong Kong as a separate from the mainland, which strips away any trade advantages we once had.”

Hong Kong has, naturally, lodged a complaint against the US with the WTO. A spokesman for the Special Administration Region (SAR) Government of Hong Kong, said “The US measures are grossly inconsistent of the relevant WTO rules and ignore our status as a separate customs territory as stipulated in Article 116 of the Basic Law and recognized by the WTO.”

The HKSAR Government will formally launch procedures in accordance with the WTO Dispute Settlement Mechanism against the US’ unreasonable measures to defend our legitimate rights.

However, although the WTO is an independent body it is currently being controlled by the US.

Traditionally the Appellate Court of the WTO adjudicates disputes between member states, but it is currently composed of only one judge. In normal circumstances, the court has seven judges, but a minimum of three is required for a quorum. The appellate body fell to one judge on December 10 last year when member states failed to make new appointments. That in turn has halted all appeal judgements on trade matters until a new solution is reached. Also, the US has  threatened to block the  body’s budget.  So, even though both China and Hong Kong, plus many other member states, have lodged complaints against the US for its tariffs war, very little can be done until more judges are appointed. And that could take ages as such appointments will continue to be blocked by the US.

It is well recognized that there are no winners in trade wars, and it is the little man, the man in the street who suffers as the tariffs are passed down the line to the consumer, thus causing inflation to rise. But Trump thinks nought for the little man, only himself.

The Chinese ambassador to the US, Xie Feng, also believes there are no winners in trade wars nor in wars over science, technology or industry. Differences, he said between the two nations should be the driving force for exchanges and mutual learning rather than “the excuse for rejection and confrontation and that successes of each were opportunities for the other.”

On the sidelines of last week’s National Peoples’ Congress in Beijing, China’s commerce minister Wang Wentao, hit back at Trump saying that coercion and threats would not work on China, nor would they scare China. “China’s determination to defend its own interests is unswerving. There are no winners in a trade war.

“If the American side goes further down this wrong path, we will fight to the end,” he warned.

China is the main trading partner in 140 countries and has free trade agreements (FTAs) with 30. And it is ready to sign even more FTAs to minimize the impact of restrictions imposed by the US.

So, China as perhaps the world’s largest trading partner and a key cog in the supply chain mechanism, the US bullying tactics would have little impact on China’s Gross Domestic Product by as little as 1 per cent, even if the tariffs went as high as 60 per cent.

Mark Pinkstone

** The blog article is the sole responsibility of the author and does not represent the position of our company. **

Hong Kong is facing a dilemma as more locals are spending their dollars outside of the city than what the visitors are bringing in.

Relaxed visa/permit restrictions for locals and foreign residents alike is making it easier for travel to the mainland while inbound traffic crossing the boundary is low budget and spending less on accommodation and food.

Tourism is an important pillar for Hong Kong’s economy. In pre-COVID times, tourism accounted for about four per cent of the territory’s Gross Domestic Product (GDP) and provided for about six per cent of total employment.

In Hong Kong’s heydays, the city saw about 65 million tourists in 2018, of which 51 million came from the mainland. It was boom time for retailers and restaurants. Long queues of mainland shoppers would line the streets along Canton Road and elsewhere waiting to buy luxury items from Gucci, Prada, Tiffany’s and other high-end stores which set up shop in Hong Kong to tap this lucrative market.

Today many restaurants and retail outlets are closing down, especially in the boundary towns of Sheung Shui and Yuen Long. The market is no longer there, and high rental costs make it almost impossible to survive.

During the 2025/2026 festive season, Hong Kong saw a 25.6 per cent rise in inbound trips on New Year’s Day 2026 (664,338 trips), but this was still countered by a massive 515,954 outbound exits on the same day.

Winston Yeung, chair of the Hong Kong Federation of Restaurants & Related Trades, told local media that business was sluggish during the Christmas holiday, with some restaurant owners calling it “the slowest business at Christmas over the past 10 years.”

Unfortunately, the local market is not propping up the tourism outlets. Instead, the locals are traveling in large numbers to Shenzhen and Macau and other parts of China for day trips or extended holidays, thereby providing a leakage in the local economy.

While Hong Kong received more than an estimated 45 million visitors last year, more than about 100 million departures were recorded by the Immigration Department of locals leaving Hong Kong by plane, train or bus mainly to the mainland (75 per cent), and to other major Asian destinations.

Hong Kong has 320 hotels offering 92,907 rooms, according to the Hong Kong Tourism Board. Despite mainlanders’ choice of more budget accommodation, occupancy rates for the hotel industry remained high at 88 per cent last year. The major hotels are not affected by the change in mainlanders’ preferences as they rely more on the affluent international tourist, visiting Hong Kong for business, conventions or holidays.

Property developer, Caldwell Banker Richard Ellis (CBRE) says Hong Kong’s hospitality market currently presents various investment-ready assets including rare investment opportunities for upper upscale and luxury hotels. These high-end properties are particularly attractive due to their resilience, as they are less reliant on Chinese group travelers and enjoy sustained spending power among affluent individual travelers and international visitors. This makes them attractive for investors seeking stable returns in a dynamic market.

To encourage locals to spend more at home and at the same time provide a bonus for tourists, Hong Kong has organised a series of mega events, many held in the new sports stadium on the site of the old Kai Tak airport in Kowloon. Traditional events in 2026 will include the French May Arts festival in March, Hong Kong Book Fair in July, Hong Kong performing Arts Expo in October, the World Snooker Grand Prix in February, and, of course, the international dragon boat races in June.

Blockbusters will include BlackPink World tour in January, the Hong Kong marathon, which draws in runners and their supports from around the world, and the Hong Kong Tennis Open also in January.

That is good for the inbound and outbound tourists alike. But more needs to be done to tip the tourism scales to a surplus for Hong Kong’s economy to grow at a faster pace. As the saying goes charity starts at home, so it is up to us as local residents who have reaped the benefits of the city to spend more in local restaurants and retail outlets than spend it elsewhere. Support local enterprises. After all, the restaurants in Hong Kong are ranked among the best in the world and are tax free as against a value-added tax applied to restaurants and shops in the mainland.