The trade war between the United States and Mainland China has resumed. The U.S. officially raised tariffs on around US$300 billion of Chinese imports to 25% last month, while China announced tariff hikes on certain U.S. products in return. But even if both sides agree to a ceasefire soon, wider uncertainties may still persist.
In fact, the U.S. has been lighting fires in recent years by imposing sanctions of one kind or another on a number of different countries. This has created enemies around the world for the country and has also damaged the global economy and political environment.
As an externally-oriented economy, Hong Kong will inevitably suffer as a result of these uncertainties. As such, there is a pressing need for the Government to join hands with the business community to plan ahead and diversify risks.
Therefore I welcome the Government’s decision to extend a range of contingency measures to help local businesses cope with the impact of the trade war. According to the latest arrangement, the validity period of the special enhanced measures by the Hong Kong Export Credit Insurance Corporation will be extended for one year to June next year. The insurance coverage for companies will also be extended. I believe these will help address SMEs’ concerns over cash flow.
The business community should also stay alert to the global trend of production diversification, and devise strategies as a matter of urgency to deal with future uncertainties. For example, businesses should look for more trade opportunities outside the U.S., while manufacturers can relocate some of their production lines to other places, after gaining a full understanding of the economic landscape.
In the long run, and regardless of the trade war, the Government should continue to help Hong Kong businesses expand into more overseas sales markets. The Free Trade Agreement and Investment Agreement between the Hong Kong Government and ASEAN comes into force this month, and will help facilitate companies to invest in Southeast Asia. The injection of $1 billion to the Dedicated Fund on Branding, Upgrading and Domestic Sales proposed in this year’s Budget will also further help the business sector to enter into new markets, such as the ASEAN countries. Moreover, Hong Kong companies should explore the Greater Bay Area as part of their market diversification strategies.
The U.S. policy of raising tariffs will only result in a lose-lose situation, which will negatively impact global trade and commerce. The SAR Government should pool the strengths of various sectors to ride out the trade risks together, while effectively and proactively expanding into markets like ASEAN to relieve pressure of the trade war on businesses.