What does Trump's return mean for Hong Kong?

Nomura predicts lower GDP growth and slower Fed rate cuts.

A second Donald Trump US presidency could heighten trade uncertainties for Hong Kong, impacting its economic stability, according to a Nomura report.

Hong Kong's real GDP growth slowed to 1.8% year-on-year (YoY) in the third quarter, down from 3.2% in the previous quarter, primarily due to weaker net export growth, which had previously buoyed its economy.

Personal consumption growth remained weak, influenced by continued northbound travel and spending, whilst retail sales, though improved from August, remained in the negative in September.

Home prices saw a modest rebound following the US Federal Reserve rate cuts and Mainland China stimulus, but resumed decline by late October. 

"We think prices could start to stabilise if the Fed delivers continued rate cuts and China’s stimulus follows through," Nomura said.

"That said, the latest US election results have added further complications, as our US economics team has substantially lowered their forecasts on Fed rate cuts in 2025."

On this note, Nomura revised its full-year forecast down to 2.5% year-on-year growth from the initial 3.3% projection. 

Moreover, Nomura expected inflation to drop in the fourth quarter due to high base effects. 

With its economic team projecting only one Fed rate cut in 2025, Nomura said "Hong Kong is likely to face a sustained high interest rate environment in 2025." 

This, alongside declining fiscal reserves—down to $509b in September—may compel the government to consider tax increases, including on income.