Trump to Squeeze Hong Kong Economy

Via Economic Policy Journal

Hong Kong

President Trump said Friday that his administration would “begin the process” of ending the American government’s special relationship with Hong Kong, including on trade and law enforcement, reports The New York Times.

“My announcement today will affect the full range of agreements we have with Hong Kong,” the president said, including “action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory from the rest of China.”

Make no mistake about it, ending the special relationship with Hong Kong is essentially putting sanctions of a sort on the region. It is restricting free trade.

Restricting free trade is never a good idea.

The United States and Hong Kong also enjoy visa-free travel, making it easy for business executives to come and go. If the United States removes Hong Kong’s special status, that could come to an end.

Specifically, under the United States-Hong Kong Policy Act of 1992, Hong Kong is treated differently by U.S. law when it comes to financial transactions, immigration and trade. That is there are little to no tariffs and other charges

That status has allowed annual trade between the two to grow to some $38 billion.

Notes the Times:

The removal of the special status could lead the United States to treat Hong Kong the same way it treats any other Chinese city. That would mean higher tariffs, including those enacted amid the trade war between the United States and China. Movement between the two places would be restricted as well. Many American businesses may choose to leave…

The bizarre goal of the Trump administration in removing the special status is to put pressure on China to ease up on its accelerating involvement in the regulations set on the city. Of course, such pressure never works and certainly won’t work against a giant like China. It only increases antagonism between the US and China and leaves less ability for Hong Kong, through trade, to breathe on its own.

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“The harder the U.S. hits us in terms of cutting our ties, what will happen is that will drive us towards mainland China, won’t it?” Regina Ip, the leader of the pro-Beijing New People’s Party in Hong Kong, told the Times.

RW