Hong Kong entrepreneur Danny Lau has to weigh his options since Donald Trump‘s return to the White House has introduced not only fresh US tariffs but also created more uncertainty in global trade.
A city view of Hong Kong. Photo: Kyle Lam/HKFP.
Lau runs Kam Pin Paints Work, which specialises in aluminium coatings. With a third of its orders coming from the US, his business is likely to be further affected due to the sharp rise of US tariffs.
The US tariffs on Chinese imports also target Hong Kong – a former British colony long considered an international trade hub and a separate customs territory from mainland China.
Hong Kong entrepreneur Danny Lau runs Kam Pin Paints Work. He told HKFP that Trump’s latest 20 per cent tariff on China and Hong Kong could severely affect his company, which has one-third of its order coming from the US. Photo: Kyle Lam/HKFP.
Lau said that despite the 10 per cent tariff announced in February, his firm had been negotiating with a potential US customer with a deal expected to start in the third quarter of this year. However, he was unsure how the talk would proceed after the tariff on China doubled this month.
“I should have retired years ago,” the 72-year-old told HKFP in Cantonese.
With a factory in Dongguan, China, Lau’s firm was already subject to US tariffs introduced in 2018, during Trump’s first presidential term. At the time, Trump imposed tariffs of 25 per cent on steel and 10 per cent on aluminium against most countries, including China, while also slapping duties on more than 1,300 Chinese products.
The 2018 tariff policy had increased shipping costs to the US, Lau said, but he still received orders from American customers, even during the Covid-19 pandemic. Kam Pin Paint Works participated in building projects in Seattle and California in recent years, with Google and Amazon among its clients.
However, he expressed concern that the new tariffs would further erode his company’s competitiveness against US domestic manufacturers and rivals from countries like South Korea.
“We are worried, but there is not much that we can do,” Lau said.
A stall in Sham Shui Po, Hong Kong, displays an overhead mask that resembles US President Donald Trump. Photo: Kyle Lam/HKFP.
‘No way to plan’
Since Hong Kong’s handover from British to Chinese rule in July 1997, the city is considered to be a separate customs territory from mainland China – a status that is stipulated by the Basic Law, Hong Kong’s mini-constitution.
Hong Kong also enjoyed a special status under US law since 1992, receiving preferential treatment from Washington in terms of economy and trade. However, it ended when Trump signed an executive order in July 2020, after Beijing imposed a national security law in the city following the pro-democracy protests and unrest in 2019.
The city has long been an international trade hub. It re-exports trillions of dollars worth of goods, with the US being a top destination.
In 2024, Hong Kong re-exported HK$289 billion of goods to the US, according to official figures. It was only behind mainland China – albeit by a large margin – which received HK$2.6 trillion of re-exports through the city.
The US was also the second largest destination of Hong Kong’s domestic products, after mainland China. Around HK$5.9 billion of the city’s locally produced products were exported to the US last year, while its domestic exports to mainland China reached over HK$20 billion.
“Hong Kong is in a tougher spot. The US no longer treats it as separate from mainland China, which strips away any trade advantages it once had,” said Julien Chaisse, an international trade expert at the City University of Hong Kong (CityU).
An employee checks a roll of aluminium sheet in a factory which processes aluminium for export in Huaibei, in Chinas eastern Anhui province on February 11, 2025. Photo: AFP.
“That’s not just symbolic because, I would say, it makes Hong Kong an even bigger liability for businesses that rely on access to North America,” Chaisse told HKFP. “Some will rethink their presence [in Hong Kong] or at least hedge their bets elsewhere.”
Hong Kong is in a tougher spot. The US no longer treats it as separate from mainland China, which strips away any trade advantages it once had.
Julien Chaisse, the City University of Hong Kong
Hong Kong Secretary for Commerce and Economic Development Algernon Yau downplayed the impact of the latest tariffs on local businesses, highlighting the small share of the city’s domestic exports to the US. He also said that many Hong Kong firms had already moved their supply chains outside of China following years of trade war.
Lau disagreed, however, saying that the commerce chief overlooked the fact that many Hong Kong companies still had supply chain in China, making them still vulnerable to Trump’s new trade war.
Lau – a life honorary chairman of the Hong Kong Small and Medium Enterprises Association (HKSMEA) – said that an association member producing Christmas decorations in mainland China for major US retailers such as Walmart and Costco, would be badly affected by the recent levy hike. The new 20 per cent tariffs could completely wipe out their 6 to 7 per cent profit margin, he said.
“It is really a mess at this point, and there is no way one can plan for the future,” he said.
HKFP also talked with several business owners with factories in Hong Kong. They declined to be quoted for this story, but they all said they were worried about the unpredictability of Trump’s trade policy.
The Kwai Chung Container Terminals in Hong Kong. Photo: Kyle Lam/HKFP.
Cargo planes in the Hong Kong International Airport. Photo: Kyle Lam/HKFP.
‘War of attrition‘
Businesses that rely on Chinese manufacturing and the US market have sought to bypass tariffs by re-routing supply chains via a third country, notably through Vietnam and Mexico, according to a 2024 study by researchers at the Chinese University of Hong Kong (CUHK).
US imports from Vietnam that had Chinese suppliers increased by about 21 per cent since the beginning of the 2018 trade war, while those from Mexico increased by about 5.5 per cent, the study said.
This workaround may be shut, as Trump also has planned for “reciprocal tariffs,” tailored to each US trading partner, which are expected to kick in on April 2.
That means companies may not be able to avoid US tariffs by moving supply chains to places previously not affected by the trade war, said Wu Jing, a global supply chain expert and one of the authors of the CUHK study.
Building new plants in a foreign country and setting up new supply chains are also costly, and companies that have moved to Vietnam and Mexico are unlikely to move again just because of Trump’s volatile policies, Wu told HKFP.
“This is what we call a war of attrition,” he said in Mandarin. “All [Trump] needs to do is to sign a policy, but firms are moving here or there using real money.”
Businessman Lau also said it would be futile for local companies to relocate their supply chains in order to dodge US tariffs, given that Trump is unpredictable and such moves are expensive.
“As the Chinese saying goes, ‘moving between floors, losing a whole lot,’” Lau said. “Let alone moving a big factory.”
Magnets showing faces of US President Donald Trump, Chinese President Xi Jinping, and Russian President Vladimir Putin, alongside others, are displayed at a stall in Sham Shui Po, Hong Kong. Photo: Kyle Lam/HKFP.
‘Forget about America’
With the latest hike, which adds a 20 per cent levy on all Chinese goods atop existing tariffs, the average US tariff rates on China have risen to around 33 per cent, according to estimates by Nomura, Japan’s largest investment bank.
“The tariff hikes that Trump has completed on China are nearly double the size of the tariff hikes during his entire first term,” Ting Lu, Nomura’s chief China economist, wrote in a research note.
As Canada and Mexico vowed to retaliate against Trump’s tariffs, China too had hit back. Beijing announced 10 to 15 per cent tariffs on US energy and a range of agricultural products, from soybean and corn to chicken and pork, and threatened it would fight the US trade war to the “bitter end.”
The flags of China and Hong Kong fly in Kowloon, Hong Kong. Photo: Kyle Lam/HKFP.
While the Hong Kong government shrugged off the impacts of the US tariffs, it also said it would file a complaint to the World Trade Organization against the US for allegedly violating international trade rules – a move that is likely to hit a dead end.
Chaisse warned that Hong Kong companies should be prepared for a more turbulent time.
This is what we call a war of attrition. All [Trump] needs to do is to sign a policy, but firms are moving here or there using real money.
Wu Jing, the Chinese University of Hong Kong
“This is going to hurt more than the last trade war,” he said. “Back in 2018, companies had time to adjust and find workarounds. This time, the speed and scale of the tariffs, combined with retaliation from all sides, leave far less room to manoeuvre.”
There have been suggestions, including from Yau, that Hong Kong businesses should explore new markets such as the Middle East and Southeast Asia to export their products.
Wu concurred that the unpredictability of the renewed trade war would force businesses in mainland China and Hong Kong to explore unknown markets, a process that would cause short-term pain but could make them less reliant on the US market.
“There is a possibility, which is forget about America,” he said.
Jing Wu, associate professor in the Department of Decisions, Operations, and Technology at the Chinese University of Hong Kong (CUHK) Business School. Photo: Kyle Lam/HKFP.
Hong Kong entrepreneur Danny Lau is also a life honorary chairman of the Hong Kong Small and Medium Enterprises Association. Photo: Kyle Lam/HKFP.
However, the big question is whether other markets could replace the US – the world’s largest economy.
“Walking away [from the US] would be a reckless move that would likely do more harm to Hong Kong than to Washington. At the same time, I reckon that relying too much on the U.S. is becoming a gamble,” CityU scholar Chaisse said, adding that businesses would likely hedge risks by diversifying investment.
“The real prize is Europe,” he said, drawing attention to strong economic ties between Hong Kong and European countries, and Europe’s growing frustration with Trump’s policies and his attitude toward the war in Ukraine. On trade, Trump had vowed to slap a 25 per cent tariff on products from the EU, which also vowed to retaliate.
“The EU isn’t happy about Washington’s protectionist turn and if tensions between the US and Europe escalate, there could be an opening for Hong Kong to deepen its role in EU-Asia trade,” he said.
Lau, whose Kam Pin Paints Work had participated in a project in Dubai, said the United States is still a market too big to be replaced by new markets like the Middle East. Plans for expanding Kam Pin Paints Work’s footprint in Europe were in discussion, but such a move would also be costly, he added.
“I just hope that these two big countries [China and the US] could improve their ties, so that normal people like us can make a living,” he said. “Otherwise, we may just shut down.”
People relax by the seaside of Victoria Harbour. File Photo: Kyle Lam/HKFP.
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Original reporting on HKFP is backed by our monthly contributors.
Almost 1,000 monthly donors make HKFP possible. Each contributes an average of HK$200/month to support our award-winning original reporting, keeping the city’s only independent English-language outlet free-to-access for all. Three reasons to join us:
🔎 Transparent & efficient: As a non-profit, we are externally audited each year, publishing our income/outgoings annually, as the city’s most transparent news outlet.
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