During the US presidential election in early November, the American Chamber of Commerce in Hong Kong (AmCham) organized another watch party following the one it hosted eight years prior. Eden Woon, President of AmCham, candidly expressed surprise at the one-sided election results. He noted the biggest plus being that the US is unlikely to experience the chaos of four years ago, anticipating a smooth transition of power that should alleviate market concerns.

 

“The key to Trump’s victory in this election is evidently domestic rather than foreign policy.” Woon said Trump holds the view that his support from voters has hinged on his ideas. Therefore, he anticipated that upon assuming office in January next year, Trump will vigorously implement these ideas in his government policies, including cutting taxes, imposing higher tariffs, and lowering interest rates. Moreover, with the Republican Party securing control of both the House of Representatives and the Senate, this will significantly facilitate his ability to govern unimpeded.

 

Regarding the critical issue of China-US relations, Woon noted that Trump is neither anti-China nor a multilateralist, showing little interest in gaining allies’ support. Woon distinctly remembered that during his first presidential term, Trump declared the US’s exit from entities such as the TPP and the Paris Agreement. Some market participants expect that China might benefit on the surface if the US steps back from developing multilateral ties. “However, Trump has consistently advocated ‘America First.’ During his presidency, he will prioritize domestic economic growth. Should he perceive China’s rising economic stature as a threat to the US, it could trigger a new round of trade war.”

“From a relative standpoint, if China can convey to him the potential for bilateral economic cooperation and the US will benefit from it, it may pave the way for improved relations between the two nations.” He further said that another factor influencing China-US relations is Trump’s incoming administration. The current nominees, many of whom are known for their hardline stance against China, are likely to affect the dynamics of the bilateral relationship.

Meanwhile, Woon believes that Tesla founder Musk’s role and function in the new administration warrants attention, being a major supporter of Trump’s campaign. Musk was recently appointed to co-lead the newly formed Department of Government Efficiency alongside Indian-American biotech entrepreneur Vivek Ramaswamy. Trump likened the new department to the Manhattan Project that developed the atomic bomb, stating, “this will send shockwaves through the system, impacting anyone involved in the wastage of government resources.”

Tesla operates as a sole proprietorship in Shanghai. Woon added that besides investing, Musk also possesses a solid understanding of China. He visited the country in April this year and was received by Premier Li Qiang. They have consistently maintained a positive relationship, which Woon believes could potentially have some mitigating effect on Trump’s policy towards China.

 

Regarding the impact of Trump’s return to power on Hong Kong, Woon believes that based on current observations, there is a possibility of the US intensifying its targeting or sanctions against Hong Kong, although it is considered low. Moreover, Hong Kong has been adjusting to the US sanctions over time. Thus, barring a major trade conflict between China and the US, or any new stressful situation appears, the relationship between both sides is unlikely to worsen, even if it does not improve. However, this conclusion holds many unknowns. There are too many unclear factors. He pointed out that many business in Hong Kong are monitoring the situation and anticipated that 2025 will be a year of progress and not necessarily a year of for these businesses to withdraw from Hong Kong.

 

 

Heiwai Tang

US Tariff Hike on Chinese Goods might be
Lower than Expected

Trump’s big victory came as a surprise to many. Heiwai Tang, Associate Dean (External Relations) of HKU Business School, attributed this mainly to the current economic climate in the US. These thorny issues will be Trump’s primary hurdle in office and are likely to influence the policy to raise tariffs he has been advocating.

 

According to Tang, the election results reflect the suboptimal domestic economic conditions in the US. Despite the apparent strong performance of the stock market and the AI industry, the unresolved wealth gap has grown more severe, particularly post-pandemic, thus resulting in voter discontent with the current state of affairs. Meanwhile, the incumbent Vice President Kamala Harris’s limited political achievements over the past four years, along with her eleventh-hour presidential bid, have likely affected the election’s outcome.

Tang believes that to deal with the various economic issues, Trump would swiftly implement “America First” economic policies once in office, particularly by raising tariffs, though not to the extent of the 60% hike mentioned during his campaign. “A sudden 60% tariff hike on Chinese goods would have a substantial impact on inflation. In this case, a more probable approach would be the targeted application of tariffs on specific goods, which would enable the US to reduce interest rates, boost the stock and property markets, and strike a balance between lowering interest rates and raising tariffs.

 

Referring to the uncertain factors influencing China-US relations, Tang described Trump as a president who prefers unilateral action, convinced that the US alone has ample power to challenge or suppress China, and he has consistently shown a reluctance to engage in cross-border collaboration with allies. It can be expected that he would reduce the formation such alliances once he becomes president. “Nevertheless, among the announced or rumoured candidates for the new administration, some hold negative views of China, which may influence future China-US relations to a certain extent.”
 

While some market participants are concerned that Trump’s presidency might impact Hong Kong’s status as an international financial centre, Tang maintains a positive outlook on its development in finance. Especially, Trump may be inclined to look to Wall Street to fill the Treasury and Federal Reserve Chairman positions, which could mean continued support for Hong Kong’s pursuit of greater profits for investment banks there, with minimal risk of suppression.

 

Looking ahead to the US’s overall economic policy, Tang foresees the US maintaining its focus on China going forward. Asia overall might not experience significant effects, but the ASEAN region, which has seen benefits in this in the past four years, could face US pressure as some high-tech industries move to establish factories there.

 

Regarding whether Hong Kong will be implicated in the China-US trade war again, potentially impacting economic development, Tang noted that the recent stock market downturn was primarily due to the weaker-than-expected stimulative effect of China’s macroeconomic policies, rather than Trump’s re-election. “The market has already factored in Trump’s return to the White House. The trade war and supply chain restructuring are expected to have a more far-reaching impact in the future. However, many factories and supply chains have shifted from the Mainland to other countries and regions in recent years, which has directly affected Hong Kong’s role as an entrepot. All sectors of society have gradually adapted to these changes, so the impact should not be too severe.”