Hong Kong has unwittingly founds itself caught in the US-China trade war, with US President Donald Trump’s latest tariffs on Chinese goods targeting the city’s products.
The Kwai Chung Container Terminals in Hong Kong. Photo: Kyle Lam/HKFP.
Trump issued an executive order on February 1 to impose an additional 10 per cent tariff on all imports from China and Hong Kong – on top of the duties they already endure. The new levy includes low-value packages that previously could enter the US duty-free.
Beijing retaliated by imposing tariffs on US imports such as energy and machinery.
Trump’s move is part of the broader global trade war the US president has unleashed since he took office in January. On Thursday, he announced a plan for “reciprocal tariffs” on US trade partners, adjusting tariffs to match the levies other countries charge on imports.
In response to Trump’s latest tariff policy, the Hong Kong government slammed the US for disregarding the city’s status as a “separate customs territory” from mainland China.
Hong Kong also threatened to file a complaint to the World Trade Organisation (WTO). Beijing already complained to the WTO on February 4.
However, complaining to the WTO is likely to hit a dead end as the system for arbitrating international trade disputes has been paralysed for years due to the US’s decision to block nominations of judges into the WTO’s Appellate Body – its top arbitration body.
This is not the first time Hong Kong has been caught in the crossfire of the US-China trade war.
HKFP looks at the timeline of the US-China trade dispute, Hong Kong’s customs status and why a complaint with the WTO may not have much effect.
US-China trade war timeline
In March 2018, during his first presidential term, Trump announced tariffs of 25 per cent on steel and 10 per cent on aluminium against most countries, including China.
US President Donald J. Trump attends Superbowl LIX between the Philadelphia Eagles and the Kansas City Chiefs, on Sunday, February 9, 2025. Photo: Daniel Torok/The White House.
Shortly after, he imposed an additional 25 per cent levy on more than 1,300 Chinese products ranging from electronic touch screens and medical products to batteries and aircraft parts.
Trump, at the time, accused China of “intellectual theft” and “unfair” trade practices. Beijing responded by imposing tariffs on US imports including pork, soybeans, and cars in April 2018.
In the following months, the world’s two largest economies would trade rounds of tit-for-tat tariffs that eventually affected at least US$300 billion worth of Chinese goods and US$110 billion worth of US goods.
The trade war only showed signs of calming down after the US and China signed a trade deal in early 2020, in which Beijing committed to buying an extra US$200 billion worth of US goods. However, Washington said Beijing fell short of honouring the commitment.
The tariffs introduced by Trump were continued by his successor, Joe Biden, who further imposed strict restrictions regarding the sales of semiconductors and other high-tech products to China.
Biden also hiked tariffs on strategic imports from China, such as electric vehicles and critical minerals, as he faced an election rematch in 2024 against Trump, who pledged 60 per cent tariffs on Chinese goods.
US President Joe Biden meets China’s Xi Jinping on November 15, 2023. File photo: White House.
In early February, weeks after he was sworn in as president, Trump imposed an additional 10 per cent tariff on Chinese goods.
He also revoked a “de minimis” exemption for imports valued under US$800, a move that would affect the operation of Chinese e-commerce giants such as Shein and Temu, both of which have been popular in the US.
Beijing retaliated by imposing duties on imports of coal, liquefied natural gas, and other goods from the US.
Hong Kong as ‘separate customs territory‘
Hong Kong, which until 1997 had been a British colony, has long been considered an international trade hub. It is also a founding member of the WTO when it was created in 1995.
Hong Kong’s mini-constitution, the Basic Law, states that the city is a “separate customs territory” and that it may enter international trade organisations and agreements as a separate entity from mainland China.
It also enjoyed a special status under US law since 1992, receiving preferential treatment from Washington in terms of economy and trade.
A couple on the waterfront promenade at Tsim Sha Tsui, on September 5, 2024. File photo: Kyle Lam/HKFP.
However, in 2020, Trump signed an executive order that rendered the tariffs he imposed on China two years earlier also applicable to imports from Hong Kong.
The executive order, issued after Beijing imposed a national security law in June 2020, effectively suspended Hong Kong’s special status.
Since then, Hong Kong’s exports to the US must be labelled as “made in China” and are subject to the same tariffs imposed on Chinese goods. The city also faces US embargos of high-tech products into China.
Trump’s additional 10 per cent duties on Chinese goods are also applied to all imports from Hong Kong, as well as the suspension of the “de minimis” exemption.
The US was Hong Kong’s third largest trading partner in 2024, according to official figures. Hong Kong imported around HK$206 billion of US goods and exported more than HK$295 billion of goods to the US, including local exports and re-exports.
The new US tariff is expected to hit Hong Kong businesses, which have supply chains in mainland China as well as e-commerce retailers.
Why a WTO complaint may go nowhere
While the city’s officials downplayed the impact of Trump’s tariffs, they also accused Washington of violating international trade rules.
The city warned that if Washington did not “rectify its wrongdoing,” it may take “all possible actions” to defend its interests, including considering taking the matter to the World Trade Organization.
Hong Kong’s secretary for commerce and economic development, Algernon Yau, said that the US tariffs would harm Washington more than Hong Kong. The tariff policy “not only fails to meet the standards of the WTO, it also harms the interests of different parties, including the US,” Yau said in Cantonese.
Chief Secretary Eric Chan, the city’s No. 2 official, said that the US’s move was “absolutely inconsistent with WTO rules” and threatened that Hong Kong would file a complaint with the WTO.
The World Trade Organisation. File photo: WTO, via Flickr.
The process of dispute resolution at the WTO begins with consultations between the parties in dispute. If that fails, a special panel consisting of three to five experts will make a ruling in the first instance. Countries can appeal against the panel’s ruling to the Appellate Body.
The Appellate Body is the WTO’s highest trade-dispute arbitration body with a panel of seven experts in international law and trade. It requires at minimum three members to be able to hear cases.
During the initial stages of the trade war in 2018, Beijing had already taken its case against the US to the WTO. It ruled in 2020 that Trump’s tariffs on Chinese products violated trading regulations.
The US lodged an appeal in October 2020. However, the case is in limbo because Washington has blocked the appointments of judges into the WTO’s Appellate Body, effectively shutting it down in December 2019.
Washington accused the WTO’s Appellate Body of “persistent overreaching” in its decision and failing to comply with WTO rules. Then-US president Barack Obama began blocking appointments to the Appellate Body in 2016, and it continued throughout Trump’s and Biden’s administrations.
The WTO warned that its panel rulings “face the risk of being appealed ‘into the void’ unless a solution is found to the impasse.”
As of today, a total of 32 WTO rulings have gone nowhere – including the US appeal of the 2020 decision on Trump’s tariffs.
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