WASHINGTON (Reuters) – President Donald Trump’s executive order ending Hong Kong’s special status under US law effectively ends separate customs treatment of Chinese territory, but the immediate impact on the trade is limited, say trade law experts.
United States President Donald Trump talks about the administration’s efforts to curb federal regulations during an event at the South Lawn of the White House in Washington, USA, July 16, 2020. REUTERS / Jonathan Ernst
Trump’s order issued Tuesday night to punish China for a new national security law imposed on Hong Kong does not explicitly mention the tariffs or the separate customs state of Hong Kong.
Instead, it suspends a 1992 law granting Hong Kong special economic status, referring to a statute governing country of origin labeling for imported products.
The net effect is to rescind Hong Kong’s status as a separate customs territory, said Georgetown University law professor Jennifer Hillman, a former appeals judge at the World Trade Organization.
That means Hong Kong’s products will now be considered to come from China for tariff purposes, Hillman and other Washington trade lawyers said.
As Hong Kong went from being a manufacturing hub to a commercial and financial hub, its exports of goods to the United States fell to just $ 4.7 billion in 2019. The largest category, according to data from the Office of the United States Census, was $ 2.2 billion returned goods initially exported from the United States.
The next largest categories were gem diamonds at $ 388 million, jewelry at $ 317 million, and other gemstones at $ 247 million.
“It is not going to be a devastating blow to the Hong Kong economy,” said Claire Reade, senior attorney for Arnold and Porter in Washington. She added that much of Hong Kong’s exports had been shifted to services.
The change could also leave many U.S. tariffs unchanged. Before the Trump administration’s trade war with China, products from both Hong Kong and China had been subject to tariffs at the most favored nation rate in the United States, which according to WTO data averaged 3.3% last year. .
A “Section 301” list subjected many Chinese consumer goods, including diamonds and jewelry, to a US tariff of 15% in September 2019, reduced in February to 7.5% as a result of the Phase 1 trade agreement. with China.
Trump’s order means that Hong Kong’s gems and jewelry, among the territory’s largest imports, along with a few other products, are now subject to the same tariffs.
Several trade attorneys said they were still examining the implications of the order on Thursday, noting that the Office of the US Trade Representative has the ability to grant exclusions from Section 301 tariffs on Chinese products. A USTR spokesman did not respond to a request for comment.
Trump’s order does not immediately affect annual United States exports of $ 30 billion to $ 40 billion to Hong Kong, which are largely duty-free, nor does Hong Kong’s independent membership in the WTO. However, China’s threatened retaliation could slow sales of American goods there in the future, trade experts say.
The port and trade center is consistently the source of the largest U.S. bilateral trade surplus, $ 26 billion in 2019, with major U.S. export categories, including semiconductors, diamonds, jewelry, motors, and parts of planes and meat.
Reports by David Lawder, Heather Timmons and Jonathan Oatis edition
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