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Oscar Liu

Sweeping tariffs by the US sent shock waves through Hong Kong’s stock market on Monday, with the city’s benchmark Hang Seng Index suffering its biggest drop since 1997.
Financial Secretary Paul Chan Mo-po offered reassurances that the market remained resilient and reiterated that Hong Kong was not retaliating with its own tariffs and would protect its free-port status, which he called a competitive edge over rivals.
According to the Basic Law, the city’s mini-constitution, Hong Kong shall not impose any tariff unless otherwise prescribed by law and should remain as a separate customs territory from the rest of the country.
Here, the Post examines Hong Kong’s free-port status and how tariffs are expected to affect the city’s economy.
1. What does a free port mean?
A free port is a designated geographical area, usually encompassing a port and its surrounding land, where goods can be landed, handled, manufactured and re-exported without being subject to tariffs and with minimal customs intervention.
Hong Kong follows a free-trade policy and hence maintains basically no barriers on trade. There is no customs tariff on goods imported into – or exported from – the city. Import and export licensing is kept to a minimum.
2. What is Hong Kong’s free-port status and its obligations under the WTO?
Article 114 of the Basic Law stipulates Hong Kong shall “maintain the status of a free port and shall not impose any tariff unless otherwise prescribed by law”. Article 115 and 116 state the city should safeguard the free movement of goods and remain a separate customs territory.
As a member of the World Trade Organization, Hong Kong has specific rights and obligations, participates in trade policy reviews and can use the global body’s dispute settlement mechanism.
This status has helped Hong Kong to become a significant global trading hub, ranking 10th in merchandise trade and 21st in commercial services trade in 2023.
3. How will tariffs and Hong Kong’s stance affect trade with the US?
In 2023, Hong Kong’s key export markets by distribution share were led by mainland China at 43.5 per cent, followed by Asean and the European Union, with the US standing as the fourth-largest at 6.5 per cent.
In the same year, the mainland remained the largest import supplier to Hong Kong, at 43.5 per cent, followed by Asean at 17.2 per cent and the EU at 5.1 per cent. The US stood at 4.3 per cent.
Professor Terence Chong Tai-leung, executive director of the Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong, said the city’s biggest imports from the US were beans and grain by-products.
“The most affected will definitely be American soybean farmers, as soybeans are the largest US export to China. They are also voters, and with varying degrees of retaliation from around the world, the US itself may not be able to withstand such immense pressure,” Chong said.

Billy Mak Sui-choi, an associate professor at Baptist University’s department of accountancy, economics and finance, said the impact on the overall economy in Hong Kong would not be significant.
“Only companies primarily exporting to the US and that have already shifted some production to Southeast Asia in recent years to circumvent US tariffs targeting mainland China production will find it unavoidable to be in the worst situation this time,” Mak said
“However, the value of goods they produce overseas is not counted in Hong Kong’s GDP. They mainly employ local people for production, which has no direct relationship with Hong Kong’s labour force.”
4. What do observers think of Hong Kong’s stance?
Mak said Hong Kong had always sought arbitration at the WTO when it believed the American tariffs violated the global body’s rules.
“Retaliation would set a negative precedent, potentially eroding foreign investors’ confidence in Hong Kong and impacting its international economic ranking – these are important factors to consider,” Mak said.
“Imposing tariffs on US goods, if import volumes aren’t substantial, wouldn’t generate significant tax revenue for the government, making it largely unnecessary.”
Chim Lee, a senior Asia analyst with the Economist Intelligence Unit, said Hong Kong was unlikely to retaliate against the US with tit-for-tat tariffs, given that doing so would harm the city’s status as a free-trade port, as well as its transport and logistics industry.
“Hong Kong’s transport and logistics industry is already under strain as US-China trade flows are set to decline substantially,” Lee said. “There is also little precedent for such actions from the Hong Kong government.”
5. Will US goods be cheaper in Hong Kong?
Lee said it was unlikely there would be a significant increase in mainland businesses and visitors purchasing American goods in Hong Kong and transporting them back over the border.
“Much of what we consider US goods, such as Apple’s iPhones, are in fact made in China and therefore not subject to the retaliatory tariffs [in Hong Kong],” Lee said.
He added that most of China’s imports of US goods did not involve the retail sector, but rather commodities such as hydrocarbons and soybeans, industrial intermediate products such as integrated circuits and medical appliances.
“Their reimportation into mainland China – as goods originating from the US – will still be subject to China’s retaliatory tariffs,” Lee said.
6. Which other free ports are avoiding imposing counter tariffs?
Singapore chose not to retaliate due to potential increased import costs. Officials said the city state intended to engage with the US to understand Trump’s concerns and potentially resolve them.
Taiwan proposed zero-tariff negotiations with Washington to mitigate the impact of newly imposed US tariffs. Authorities pledged to remove trade barriers instead of retaliating and emphasised continued Taiwanese investment in the US despite potential economic challenges.


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Hong Kong economy

What is Hong Kong’s free-port status and how will tariffs affect the economy?

Hong Kong’s finance chief says the city will protect its free-port status. Photo: Elson Li

Financial Secretary Paul Chan meets the press amid the market sell-off. Photo: Sam Tsang

Hong Kong should not join Beijing in imposing counter tariffs: experts

In a tit-for-tat move, Beijing said on Friday it would impose a 34 per cent tariff on imported American goods. Photo: Sam Tsang

The US is Hong Kong’s second-largest export market, accounting for US$37.9 billion in merchandise in 2024, about 6.5 per cent of the city’s total exports. Photo: Sam Tsang

Beijing’s counter-tariffs on US goods to have ‘limited impact’ on Hong Kong prices

Hong Kong’s imports of US goods peaked at HK$231 billion in 2018, before declining by 13 per cent over the subsequent five years to HK$200 billion in 2023. Photo: Dickson Lee

The Hong Kong government has issued a statement expressing strong disapproval of the additional duty on products of Hong Kong, adding it would file a complaint to the World Trade Organization. Photo: Winson Wong

US consumer-oriented agricultural products accounted for 6.7 per cent of Hong Kong’s total imports in that category in 2023, according to the US Department of Agriculture. Photo: Yik Yeung-man

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Hong Kong

Hong Kong Economy

The Post examines the impact of tariffs on Hong Kong as the city’s stock market suffers its largest single-day loss


The Post examines the impact of tariffs on Hong Kong as the city’s stock market suffers its largest single-day loss.


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Explainer | What is Hong Kong’s free-port status and how will tariffs affect the economy?

The Post examines the impact of tariffs on Hong Kong as the city’s stock market suffers its largest single-day loss

1. What does a free port mean?