Trump's law supporting Hong Kong protesters threatens to escalate US-China trade war

Washington's provocative support for pro-democracy movement risks derailing talks

Ben Chapman
Thursday 28 November 2019 18:15
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The laws call for sanctions against Chinese and Hong Kong officials deemed to have abused human rights
The laws call for sanctions against Chinese and Hong Kong officials deemed to have abused human rights

Concerns are mounting that Donald Trump’s decision to sign into law two bills supporting human rights in Hong Kong could scupper delicate trade talks between the US and China, with knock-on effects for the faltering global economy.

Analysts warned of “hugely negative” effects on Hong Kong’s position as an important financial hub after China reacted angrily to the new laws on Thursday.

Mr Trump is due to raise tariffs on some $160bn of Chinese products, including smartphones and laptops, on 15 December. However, representatives of both of the world’s two largest economies had suggested that a deal to de-escalate tensions was close.

Washington's latest moves in response to ongoing pro-democracy protests in Hong Kong put that progress in jeopardy.

The laws call for sanctions against Chinese and Hong Kong officials deemed to have abused human rights, and also require annual reviews of Hong Kong’s special trade status with the US.

So far, both the US and China have sought to keep Hong Kong and trade issues separate, said Tu Xinquan, of the University of International Business and Economics.

“China doesn't want to connect the two things together,” said Mr Tu. “China believes trade issues should not be politicised.”

However, Stephen Chiu, an analyst at Bloomberg Intelligence, warned that agreement would prove difficult.

“Regardless of what both sides said, it looks like it’s not easy to strike a consensus, so now even striking a phase-one deal could be hard,” Mr Chiu said.

Michael Hirson, of Eurasia Group, offered a more positive view. “To be sure, Beijing is angered at the US for interfering in what China considers its domestic affairs and for emboldening the protest movement,” he told the BBC.

“But some of China's anger over the bill is posturing for the domestic audience, and Beijing will not be so upset as to let this stand in the way of a truce over trade.”

In a statement, China's ministry of foreign affairs called the law “pure interference in China’s internal affairs” and a move “full of prejudice and arrogance ... extremely evil in nature and dangerous in motive”.

“The US side ignored facts, turned black to white, and blatantly gave encouragement to violent criminals who smashed and burned, harmed innocent city residents, trampled on the rule of law and endangered social order,” the statement said.

Hong Kong businesses have already been hit hard by the protests, with luxury retailers losing out on $2.2bn (£1.7bn) in sales this year, according to a report by Bain consultancy published on Thursday.

It found that wealthy shoppers had shunned Hong Kong, opting for China, South Korea and Japan instead.

Bain partner Claudia D'Arpizio said that 1,000 stores owned by luxury brands in Hong Kong are too many for a “market that is no longer a hub for touristic shopping”.

Markets reaction was muted on Thursday, in part because traders had already reacted to the news when the US congress passed the bill earlier this month, but before Mr Trump signed it into law.

Additional reporting by agencies

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