Hong Kong’s economic future is in limbo and dependent on US-China trade war negotiations, the government has said after the city’s GDP growth was revised to 0.6 per cent in the first quarter.
The gross domestic product figure – the slowest quarterly increase in a decade – was adjusted based on revised data published by Census and Statistics Department, following the preliminary revelation of 0.5 per cent growth year on year earlier this month.
Hong Kong, a free port, was caught in the crossfire of the trade war, which has harmed the city’s external trade, retail sales, financial sentiment and the economy overall, both directly and indirectly.
Andrew Au Sik-hung, a government economist, said uncertainties escalated after the United States and China raised tit-for-tat tariffs on each other last week, in addition to other geopolitical tensions.
“Currently, the near-term economic outlook is subject to a high level of uncertainty,” he said on Friday.
“If US-China trade tensions do not show any easing in the near term, they would pose a drag on the global economy and the Hong Kong economy would inevitably face greater downward pressure.”
The government maintained the full-year economic growth forecast at 2 to 3 per cent, with a review due in about August.
Last year, the city’s GDP rose 3 per cent.
The trade war took a dramatic turn after midnight on May 5 Hong Kong time when US President Donald Trump announced on his Twitter account that 10 per cent tariffs imposed on US$200 billion worth of Chinese products would be raised to 25 per cent on May 10.
Accusing Beijing of changing negotiation terms in the trade dispute, Trump threatened to levy 25 per cent tariffs on a further US$300 billion of Chinese goods not yet exposed to tariffs.
This meant many consumer goods such as food and clothing would be subject to tariffs.
In response, China unveiled a plan on May 13 to impose new 25 per cent tariffs on the majority of US$60 billion worth of American goods already affected by levies, which would kick in on June 1.
“The recent developments show there are deep differences between both sides,” Au said.
“Apart from US-China trade tensions, other external uncertainties, such as Brexit, geopolitical tensions and domestic politics in some advanced economies also warrant attention.”