US-China trade war could hammer export-dependent Hong Kong hard

Merchandise trade accounted for 157.4% of 2017 GDP.

As tensions between economic superpowers US and China escalate, the small and export-dependent economy of Hong Kong stands smack in the middle of economies projected to bear the brunt of the fallout.

This comes as China imposed additional tariffs on 128 US products including fruit and pork in retaliation to the Trump administration's decision to impose hefty duties on steel and aluminum, which could potentially result in a full-blown trade war.

“We expect Hong Kong, Singapore, Taiwan, and South Korea to be hit the hardest, as their economies are directly and heavily reliant on the performance of the mainland Chinese manufacturing sector,” according to BMI Research.

Also read: US-China trade war could cost 1 in 5 Hong Kong jobs

Merchandise trade accounts for 157.4% of Hong Kong’s GDP in 2017 as the SAR has long ceded the bulk of its manufacturing to the Mainland. Shipments headed to China also account for more than half of overall exports.

“Re-exports to mainland China also account a significant proportion of exports, which suggests that other economies in the region that export to Hong Kong are also vulnerable,” BMI added.