HK Banks on Free Port Status to Soften Blow of US-China Tariff War

City's separate administrative system also gives it leeway in how it responds to US tariffs

- Magdalene Fung

HONG KONG - Hong Kong has not been spared in the tariff crossfire between US President Donald Trump and China, but "the sky will not fall" in the city thanks to its unique advantages, according to a senior Chinese official.

Mr. Trump has slapped up to 145 percent tariffs on imports from China, including Hong Kong, despite the city's status as a free port, where goods are processed and pass through without being taxed.

The development has sparked fear among Hong Kong's business community, but the financial hub with an open economy has opted not to hit back with tariffs of its own - in stark contrast to Beijing, which has retaliated blow for blow so far.

Officials have spoken up repeatedly to reassure businesses and investors after Hong Kong's benchmark Hang Seng Index fell off a cliff when the initial round of new tariffs was first announced on April 3.

"Hong Kong is fully capable of riding out the storm," Mr. Huang Jingrui, a spokesman for the Chinese Foreign Ministry arm in Hong Kong, wrote in a letter published in the city's flagship English-language newspaper on April 9.

Financial Secretary Paul Chan on April 13 reiterated that Hong Kong would remain a free port and continue to keep its doors wide open for global businesses, investment and talent in these turbulent times.

"Hong Kong can break new ground amid the changing landscape, as long as people stay united and do their best," Mr. Chan wrote in his weekly blog.

Hong Kong's status as a free port and a separate territory under China's "one country, two systems" framework gives it leeway to decide how to respond to the aggressive US tariffs, potentially cushioning some of the impact on the city.

Under the framework, China has promised the city a high degree of autonomy that lets it retain its own economic and administrative systems.