US President Donald Trump’s April 2 “Liberation Day” tariffs marked not a resurgence of American economic might but a symbolic withdrawal into insular protectionism. By imposing a sweeping 10 percent universal import duty, which came into effect on Saturday, with additional higher tariffs on major trade partners, including China, Vietnam, Japan and the European Union, taking effect on Wednesday, the United States is not revitalizing its economic prowess; it is accelerating its detachment from the world’s multilateral trade system and raising the odds of a global recession and a US recession this year.
While this policy is dressed in the rhetoric of national revival, its practical consequences signal a deliberate dismantling of the global economic fabric. For Hong Kong, a city deeply intertwined with both the Chinese mainland’s external trade and international finance, the implications are complex but also offer a rare opportunity to reposition itself with strategic clarity — at the very least, the city must step up efforts to diversify its overseas market.
Contrary to the assumptions embedded in the US tariff logic, China is no longer as vulnerable to such measures as it was in the early stages of the trade war initiated by the US in 2018. Since 2018, China has methodically recalibrated its export strategies, reducing its dependence on the US market. According to data from China’s General Administration of Customs, the share of Chinese exports headed to the US has declined from 19.2 percent in 2018 to 14.7 percent in 2024. At the same time, China has significantly deepened its commercial relationships with Southeast Asia, Africa, Latin America, and Europe — regions that are increasingly receptive to Chinese goods, services, and investment. This strategic realignment has been further propelled by major initiatives such as the Belt and Road Initiative, which has helped to expand China’s economic footprint across the developing world. Therefore, China’s exposure to US economic coercion is now significantly diminished. The Hong Kong Special Administrative Region, serving as a crucial financial artery for this diversified trade strategy, benefits both directly and indirectly from the mainland’s strengthened global positioning, showcasing the resilience of its economy.
Yet Hong Kong must not assume immunity from the consequences of the exorbitant US tariffs, including an anticipated decline in trade, particularly transshipments, as well as weaker global demand for the city’s financial and professional services.
But as they say, every cloud has a silver lining. The city’s linked exchange rate, which pegs the Hong Kong dollar to the US dollar, effectively binds its monetary policy to that of a country increasingly marked by political polarization, fiscal dysfunction, and economic stagnation. As US interest rates ultimately soften in response to the recent stock market crash and domestic economic pressures (fears of a US recession have been stoked by the new tariffs), the Hong Kong dollar is likely to depreciate passively as well. While often viewed as a vulnerability, this currency shift presents a timely and advantageous opening for Hong Kong’s economic revitalization.
One of the immediate beneficiaries of a weaker Hong Kong dollar is the tourism industry. With more competitive pricing, the city becomes a more attractive destination for travelers from the mainland, Southeast Asia, and other emerging regions. After enduring years of disruption from social unrest and the global COVID-19 pandemic, Hong Kong’s tourism sector is poised for a significant resurgence. A renewed influx of tourists would catalyze growth across multiple sectors — retail, hospitality, dining, and entertainment — resulting in increased employment and a boost in consumer sentiment. To fully capitalize on this trend, the government must urgently improve tourism infrastructure, streamline visa processes, and launch region-specific promotional campaigns. The time for action is now.
Equally significant is the impact on domestic consumption. In recent years, Hong Kong residents have routinely crossed into Shenzhen and other neighboring mainland cities in search of more cost-effective goods and services. A depreciated Hong Kong dollar reduces the financial incentive to spend across the border and overseas, redirecting consumer expenditure back into the local economy. This shift can provide a vital lifeline to small and medium-sized businesses grappling with post-pandemic recovery. Local retailers, service providers, and neighborhood businesses are poised to benefit from this renewed domestic spending, thereby strengthening the internal economic resilience.
The investment landscape, too, stands to benefit from this dynamism in the currency market. A weaker Hong Kong dollar lowers the cost of market entry for foreign investors and enhances the appeal of Hong Kong-based operations. For multinational firms seeking proximity to the mainland’s manufacturing base or aiming to establish a foothold in the Guangdong-Hong Kong-Macao Greater Bay Area, Hong Kong offers not only geographical convenience but also an internationally aligned legal framework, a bilingual workforce, and a robust financial infrastructure. With the mainland expanding its global partnerships, particularly across the Global South, Hong Kong’s value as a conduit for international capital into the mainland becomes even more compelling. The HKSAR government should intensify its outreach to firms in Europe, Southeast Asia, and the Middle East that are actively recalibrating their China strategies, offering incentives and clear policy road maps to attract long-term investment.
Nevertheless, the transition is not without challenges. Despite growing diversification, Hong Kong’s reexport economy remains significantly reliant on trade with the US. As of 2024, Hong Kong’s exports (mainly reexports) to the US accounted for approximately 6.5 percent of its total export value — a nonnegligible share. Businesses involved in electronics, textiles, and industrial equipment may face challenges, including reduced demand and tighter profit margins. These sectors, often operating under slim profit structures, will require targeted policy interventions. The HKSAR government must proactively consider fiscal support, loan guarantees, and workforce retraining initiatives to mitigate the short-term disruptions and facilitate transitions into more sustainable industries.
Looking ahead, Hong Kong must adopt a more comprehensive strategic approach that reflects the evolving trends in global commerce. As Washington recedes from its role as a worldwide trade leader, China is emerging as a central force in the economic development of Asia, Africa, and Latin America. These regions, which represent a growing share of global GDP and consumer demand, are increasingly turning to China as a partner in infrastructure, technology, and finance. Hong Kong’s comparative advantages — its legal certainty, financial depth, and international connectivity — uniquely serve as a gateway to these burgeoning markets.
To solidify this role, the HKSAR government must deepen institutional engagement with emerging economies. This includes forging stronger ties with members of the Association of Southeast Asian Nations, the African Continental Free Trade Area, and regional trade coalitions in Latin America. By establishing trade councils, participating in business forums, and investing in cross-border infrastructure, the HKSAR can more firmly anchor itself within China’s global economic architecture. Promoting the use of renminbi in trade settlements will further reduce dependence on the US dollar and align the city more closely with national objectives. Simultaneously, developing capabilities in financial technology, green finance, and logistics — particularly those serving the needs of emerging markets — will help Hong Kong transition from a passive transit point to a dynamic architect of future trade corridors.
Trump’s “Liberation Day” tariffs will not revive American manufacturing, nor will they unravel the intricate web of global supply chains already pivoting eastward. Instead, they will further isolate the US while accelerating China’s rise as a leader in international commerce. For Hong Kong, both challenges and opportunities loom. By aligning more closely with the nation’s strategic ambitions and strengthening its role as a global connector, the city can transform international disruption into national advantage. The HKSAR’s future lies not in resisting change but in embracing its role as a vital participant in China’s expanding global engagement.
The author is a solicitor, a Guangdong-Hong Kong-Macao Greater Bay Area lawyer, and a China-appointed attesting officer.
The views do not necessarily reflect those of China Daily.
