As a business owner in Hong Kong, the greatest problem caused by the trade war is the huge amount of uncertainty it has created. I know I am not alone in this concern – fellow members, especially those with interests in the US and/or the Mainland, have told me that they are holding back on making important business decisions until the picture becomes clearer.
But when will that be? For now, we cannot say with any degree of certainty what the impact will be, or how long it will last.
The first wave of tariffs was implemented by the United States in July – and affected economies including the Mainland have responded in kind. But the situation remains incredibly fluid as U.S. President Donald Trump continues to threaten higher and more tariffs across a wider range of products.
When Trump first suggested such measures, there remained some hope that it was simply bluster to fit in with his “America First” rhetoric. Plenty of economists pointed out that a trade war would not actually benefit the U.S.
There have also been moments of rapprochement between the United States and Beijing, giving hopes of a return to friendly terms. For now, the outlook appears to be somewhat bleak with the prospect of further escalation becoming increasingly likely.
No business wants to make investments when the climate is so uncertain and the future so unclear. Confidence dwindles and risk-taking is less appetizing.
And the impact on Hong Kong is already starting to be felt. We have recently been canvassing our members about the impact on their businesses and their thoughts on how to deal with the situation.
One key concern is that banks may tighten credit. This would particularly affect SMEs, which are a hugely important part of Hong Kong’s economy. Some of our trade members, meanwhile, have already seen U.S. orders begin to decline.
In the logistics industry, some members have seen orders change from the usual long-term contracts to short-term. They are worried that overseas buyers will switch to other ports in Asia, which could ultimately lead to Hong Kong losing its status as a major transit point connecting the Mainland and the world.
In my own industry, the hotel sector, there are concerns about the impact of a depreciating renminbi on the numbers of Mainland tourists and their spending habits. This would also impact the broader tourism and retail sectors.
Many of these fears are still conjecture, and hopefully, the situation will not deteriorate too dramatically.
For now, Hong Kong businesses have to figure out how to cope with the uncertainty. We may not know what the ultimate impact of the trade war will be, but that doesn't mean we are helpless.
Many heads are better than one, and here at the Chamber we are currently compiling the insights and suggestions from our members. We hope that together we can come up with solutions to help tide us over during this unsettled period. eq