Trade war could hit half a percentage point of Hong Kong GDP: official

Higher tariffs will hit consumers right in the pocket.

The protracted trade dispute between the US and China stands to cost Hong Kong half a percentage point in economic growth, commerce chief Edward Yau said as higher tariffs that will kick into effect by end-February hits local spending, reports South China Morning Post. 

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Yau adds that tariff-hit businesses could withstand 10% levies but could no longer avoid passing on the cost to consumers once the US unilaterally increases levies to 25% on March if the economic superpowers fail to reach an agreement.

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A small and export-dependent economy, merchandise trade accounted for 157.4% of Hong Kong GDP in 2017, data from Fitch Solutions show.

The full impact of Beijing and Washington locking horns on Hong Kong’s overall economy, however, will be unmeasurable. “Hong Kong’s economy is no longer only about manufacturing. Therefore, under the influence of the global economic environment, it is difficult to estimate the impact on the investment prospects or the profitability of enterprises,” Yau said.

Yau’s estimate indicates a bigger damage than the estimate by finance secretary Paul Chan who expected that the direct impact of the trade war will be limited to tenth or a fifth of a percentage point of growth. Chan added that a full-blown trade war could negatively impact one in five Hong Kong jobs especially those in the trade and logistics sector which employ roughly 730,000 people.

As much as 1% of Hong Kong’s GDP is exposed to US tariffs on Chinese goods via supply chains, data from Schroders show.