(Reuters Breakingviews) - The United States has found a new way to make China pay for Covid-19: by targeting Hong Kong.
America’s top diplomat Mike Pompeo declared on Wednesday that the city is no longer autonomous. That decision could end decades of special treatment for Hong Kong, which has been viewed as distinct from the mainland for the purposes of trade and travel. In broad terms, Pompeo’s claim is justified. China has proposed a national security law that would impose fresh curbs on the city, a move that has sparked bipartisan backlash in the United States.
The pain would fall first and hardest on Hong Kong, where 1,300 U.S. companies have a presence. About $70 billion in goods and services flow between the region and the United States each year, and Hong Kong has not been subject to tariffs levied in President Donald Trump’s trade war with China. It’s also allowed to import advanced technology not available to the mainland, while residents face easier visa requirements.
True, Hong Kong is tiny measured next to the People’s Republic. But China faces others risks. Thousands of protestors took to Hong Kong streets on Wednesday and hundreds were arrested. The economic impact of the U.S. move could further inflame residents. China has so far refrained from a Tiananmen Square-like crackdown on angry protests in the city, but more extreme violence could test Beijing’s patience.
Trump has tended to be muted in his reaction to Hong Kong unrest. Rather than impose sanctions on individuals responsible for human rights abuses, as he has the power to do, he has prioritized reaching a trade deal with China. With a U.S. election due in November, the calculus may have changed. The Covid-19 pandemic has pushed the U.S. unemployment rate to nearly 15% in April.
That sets the scene for a new phase in hostilities. As well as stripping Hong Kong of some privileges, sanctions on Chinese officials and firms are also on the table. Meanwhile Trump has made his anti-China stance a part of his re-election platform, accusing presumptive Democratic nominee Joe Biden of being soft on Beijing. Hong Kong could be the hapless spark in a much bigger political conflagration.Reuters Breakingviews is the world's leading source of agenda-setting financial insight.
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