From 'Made in HK' to 'Made in China'
American interests are likely to be hit harder due to surplus: experts
Published: Aug 11, 2020 10:23 PM

Hong Kong Photo: VCG

Imports from Hong Kong to the US will be labeled "Made in China" instead of "Made in Hong Kong" from September 25, according to a notice published on Tuesday by the US Customs and Border Protection, Department of Homeland Security.

Analysts said that while Hong Kong will suffer a little, the US will suffer more, as the US has a huge trade surplus with Hong Kong.

The notice was in light of US President's executive order on Hong Kong Normalization, issued on July 14, 2020, suspending the application of section 201(a) of the US-Hong Kong Policy Act of 1992, read the US government document.

"The US move is gross interference in China's internal affairs and a full embodiment of its foreign trade policy with political strings attached," Hu Qimu, a senior fellow at the Sinosteel Economic Research Institute, told the Global Times on Tuesday.

The customs notice is actually the implementation of the executive order signed by the US president on July 14, which ended the special treatment granted to Hong Kong, because the national security law that China had passed has effectively deterred anti-China forces in Hong Kong, said Hu.

The US customs' move means that it will suspend Hong Kong's special tariff status from September, and from then on, the exports from Hong Kong to the US will subject to the same tariff rates as the products from the Chinese mainland, which would undercut Hong Kong exports' market competitiveness, an executive of a Shenzhen-based trading agency surnamed Duan told the Global Times Tuesday.

"Some US buyers may shift from Hong Kong to other countries and regions due to higher tariffs. But the announcement is more of a gesture rather than something that will generate a significant impact as Hong Kong does not manufacture a lot of products and 'Made in Hong Kong' products sent to the US are relatively small in quantity," Duan said. 

It is highly likely that the HKSAR will retaliate by imposing higher tariffs on US imports, industry observers said. 

"Hong Kong is one of the major export destinations for US agricultural products, and the US has long been recording a substantial trade surplus with Hong Kong. So, the tit-for-tat tariff war will make the US suffer a lot more than Hong Kong," Duan added.

The US' goods trade surplus with Hong Kong in June was $1 billion, making Hong Kong the third-biggest trade partner of the US in terms of the surplus, according to statistics from the US Census Bureau released last Wednesday. 

Trade between Hong Kong and the US in the first half of the year stood at $17.88 billion, with a trade surplus of $5.72 billion for the US. 

Top exports from the US to Hong Kong include cellphones, computer chips, civilian aircraft, photo-sensitive semiconductors, computers and frozen beef, according to a WorldCity analysis.

"Given that the China-US trade negotiations have not yet concluded, the cancellation of the US special trade treatment for Hong Kong is bound to raise the cost of Hong Kong's trade with the US and further hit Hong Kong's economy in addition to the impact of COVID-19," Hu added.

But Hong Kong's biggest advantage is that it is close to the Chinese mainland, which has huge market demand that can help Hong Kong hedge against external developments, Hu noted.

Hong Kong witnessed positive annual growth in exports in June only with the Chinese mainland and the island of Taiwan among its major trade partners, while exports with the US decreased 21.4 percent on a yearly basis, according to the Census and Statistics Department of the HKSAR.

A transition period of 45 days will be granted for commercial realities and affected parties, thus goods produced in Hong Kong must be marked to indicate that their origin is "China" after September 25, 2020, read the notice.

"The US is soon entering the presidential election. Even if the order goes into effect on September 25, it will take about three months until a new US president takes office in January. How the US will execute the order will depend on the next president," Tian Yun, vice director of the Beijing Economic Operation Association, told the Global Times Tuesday.