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China has vowed to retaliate after the United States ended Hong Kong’s preferential trade status and imposed sanctions on officials cracking down on rights.
President Donald Trump said he was acting because China had taken Hong Kong’s freedom from him after he imposed a new security law.
Beijing condemned Trump’s decision and said it would impose sanctions on relevant individuals and entities in the United States.
Ties between the United States and China have become increasingly strained on a wide range of issues.
In addition to Beijing’s actions in Hong Kong, Trump criticized China for its handling of the coronavirus pandemic, as well as for its military build-up in the South China Sea, its treatment of Muslim minorities, and massive trade surpluses.
Trump’s decision signifies the end of Hong Kong’s special trade status with the US, agreed in 1984 when the territory was still a British colony. Hong Kong is expected to receive the same treatment as mainland China, meaning its products may be subject to additional tariffs.
The controversial security law, which effectively prohibits criticism of the Chinese government, is the most radical change in Hong Kong’s political landscape since the UK restored sovereignty to Beijing in 1997.
Trump also said he had signed the Hong Kong Autonomy Law, which was unanimously passed in Congress earlier this month and penalizes banks that do business with Chinese officials who implement the security law.
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In a heavily worded statement, the Chinese Foreign Ministry described the decision as “serious interference” in its internal affairs, saying the country would impose retaliatory sanctions to “safeguard China’s legitimate interests.”
“The United States’ attempt to obstruct the implementation of the national security law for Hong Kong will never be successful,” the statement said.
“We urge the American side to correct its mistakes, refrain from implementing the law, and stop interfering in China’s internal affairs in any way. China will respond strongly if the United States goes ahead.”
What did President Trump say?
Speaking at the Rose Garden on Tuesday, Trump said the executive order was intended to “hold China accountable for its aggressive actions against the people” of Hong Kong.
“Without special privileges [for Hong Kong], without special economic treatment or export of sensitive technologies, “said the president, who announced for the first time in May that his administration would begin to cut the territory’s special status.
According to a document released by the White House, any dealings in the property of the United States by anyone who is held responsible or complicit in “actions or policies that undermine democratic processes or institutions in Hong Kong” would be blocked.
It also orders officials to “revoke license exceptions for exports to Hong Kong” and includes revocation of special treatment for Hong Kong passport holders.
Trump said the Hong Kong Autonomy Law gave the administration “powerful new tools to hold individuals and entities involved in Hong Kong’s extinction of freedom accountable.”
After being questioned by a journalist, the president said he had no plans to speak to Chinese President Xi Jinping.
Trump also said his administration held China “fully responsible for hiding the [coronavirus] and unleash it on the world. “His own response to the pandemic has come under scrutiny, as the United States has 3.4 million recorded cases, the highest in the world, and more than 136,000 deaths.
The president’s political speech rambled on in a protracted political attack on his Democratic presidential challenger, Joe Biden, from trade and immigration to police surveillance and climate change.
New Hong Kong security law
Perception is reality
It wasn’t about if, but when. Eliminating Hong Kong’s special status will mean that companies based there will now have to assess what this means to them.
Hong Kong is a re-export hub, which means that products passing through Hong Kong to the US but coming from elsewhere, such as China, for example, have avoided tariffs that the US has imposed on China.
Now that Hong Kong’s special status has disappeared, companies in mainland China can find another place to ship their products, which would see Hong Kong’s port and logistics companies suffer.
And what impact will this have on American companies and multinationals that use Hong Kong as a regional hub? Well, as a business consultant told me, the structural reasons why a company would use Hong Kong as its hub are still there: low tax rates, good geographic location, currency convertibility.
But perception is reality, and if the perception is that doing business in Hong Kong has become much more burdensome, why not go to Mainland China or Singapore?
What is happening with the relations between the United States and China?
With Trump facing an uphill battle for reelection this November, he and Biden have accused each other of being weak with China.
On Monday, the administration condemned China’s military build-up in the South China Sea, accusing it of intimidating its neighbors.
Last Friday, Trump told reporters on Air Force One that a “phase two” trade deal with China was in doubt due to his handling of the coronavirus, which he called the “plague.”
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The United States also officially withdrew last week from the World Health Organization, which Trump had accused of owing China a debt.
Last week, too, the Trump administration announced sanctions against Chinese politicians who it says are responsible for human rights violations against Muslim minorities in Xinjiang.
