The Kwai Chung Container Terminals in Hong Kong. Photo: Kyle Lam/HKFP. USed with permission.

This report was written by Han Tse and published in Hong Kong Free Press on February 15, 2025. The following edited version is published as part of a content partnership agreement.

Hong Kong has unwittingly found itself caught in the US-China trade war, with US President Donald Trump’s latest tariffs on Chinese goods targeting the city’s products.

Trump issued an executive order on February 1 to impose an additional 10 percent tariff on all imports from China and Hong Kong — on top of the duties they already endure. The new levy includes low-value packages that previously could enter the US duty-free.

Beijing retaliated by imposing tariffs on US imports such as energy and machinery. The Hong Kong government slammed the US for disregarding the city’s status as a “separate customs territory” from mainland China. It also threatened to file a complaint to the World Trade Organisation (WTO). Beijing already complained to the WTO on February 4.

However, the complaints to the WTO are likely to be a dead end as the system for arbitrating international trade disputes has been paralysed for years due to the US’s decision to block nominations of judges into the WTO’s Appellate Body — its top arbitration body.

This is not the first time Hong Kong has been caught in the crossfire of the US-China trade war.

HKFP looks at the timeline of the US-China trade dispute, Hong Kong’s customs status and why a complaint with the WTO may not have much effect.

US-China trade war timeline

In March 2018, during his first presidential term, Trump announced tariffs of 25 percent on steel and 10 percent on aluminium against most countries, including China.

Shortly after, he imposed an additional 25 percent levy on more than 1,300 Chinese products ranging from electronic touch screens and medical products to batteries and aircraft parts.

Trump, at the time, accused China of “intellectual theft” and “unfair” trade practices. Beijing responded by imposing tariffs on US imports including pork, soybeans, and cars in April 2018.

In the following months, the world’s two largest economies would trade rounds of tit-for-tat tariffs that eventually affected at least USD 300 billion worth of Chinese goods and USD 110 billion worth of US goods.

The trade war only showed signs of calming down after the US and China signed a trade deal in early 2020, in which Beijing committed to buying an extra USD 200 billion worth of US goods. However, Washington said Beijing fell short of honouring the commitment.

The tariffs introduced by Trump were continued by his successor, Joe Biden, who further imposed strict restrictions regarding the sales of semiconductors and other high-tech products to China.

Biden also hiked tariffs on strategic imports from China, such as electric vehicles and critical minerals, as he faced an election rematch in 2024 against Trump, who pledged 60 percent tariffs on Chinese goods.

In early February, just a few weeks after he was sworn in as president, Trump imposed an additional 10 percent tariff on Chinese goods.

He also revoked a “de minimis” exemption for imports valued under USD 800, a move that would affect the operation of Chinese e-commerce giants such as Shein and Temu, both of which have been popular in the US.

Beijing retaliated by imposing duties on imports of coal, liquefied natural gas, and other goods from the US.

Hong Kong as a ‘separate customs territory‘

Hong Kong, a British colony until 1997, has long been considered an international trade hub. It was also a founding member of the WTO, created in 1995.

Hong Kong’s mini-constitution, the Basic Law, states that the city is a “separate customs territory” and that it may enter international trade organisations and agreements as a separate entity from mainland China.

It also enjoyed a special status under US law since 1992, receiving preferential treatment from Washington in terms of economy and trade.

However, in 2020, Trump signed an executive order that rendered the tariffs he imposed on China two years earlier also applicable to imports from Hong Kong.

The executive order, issued after Beijing imposed a national security law in June 2020, effectively suspended Hong Kong’s special status.

Since then, Hong Kong’s exports to the US must be labelled as “made in China” and are subject to the same tariffs imposed on Chinese goods.

Trump’s additional 10 percent duties on Chinese goods and the suspension of the “de minimis” exemption are also applied to all imports from Hong Kong.

The US was Hong Kong’s third largest trading partner in 2024, according to official figures. Hong Kong imported around HKD 206 billion of US goods and exported more than HKD 295 billion of goods to the US, including local exports and re-exports.

The new US tariff is expected to hit Hong Kong businesses, which have supply chains in mainland China as well as e-commerce retailers.

Why a WTO complaint may go nowhere

While the city’s officials downplayed the impact of Trump’s tariffs, they also accused Washington of violating international trade rules.

The city warned that if Washington did not “rectify its wrongdoing,” it may take “all possible actions” to defend its interests, including considering taking the matter to the World Trade Organization.

However, a complaint with the WTO may not have much effect.

The process of dispute resolution at the WTO begins with consultations between the parties in dispute. If that fails, a special panel consisting of three to five experts will make a ruling in the first instance. Countries can appeal against the panel’s ruling to the Appellate Body.

The Appellate Body is the WTO’s highest trade dispute arbitration body, with a panel of seven experts in international law and trade. It requires at minimum three members to be able to hear cases.

During the initial stages of the trade war in 2018, Beijing had already taken its case against the US to the WTO. It ruled in 2020 that Trump’s tariffs on Chinese products violated trading regulations.

The US lodged an appeal in October 2020. However, the case is in limbo because Washington has blocked the appointments of judges into the WTO’s Appellate Body, effectively shutting it down since December 2019.

Washington accused the WTO’s Appellate Body of “persistent overreaching” in its decision and failing to comply with WTO rules. Then-US president Barack Obama began blocking appointments to the Appellate Body in 2016, and this continued throughout Trump’s and Biden’s administrations.

The WTO warned that its panel rulings “face the risk of being appealed ‘into the void’ unless a solution is found to the impasse.”

As of today, a total of 32 WTO rulings have gone nowhere — including the US appeal of the 2020 decision on Trump’s tariffs.