President Trump took aim at the World Health Organization and Hong Kong during a press conference on ... [+]
I was talking to a friend on the phone just after lunch yesterday when his wife could be heard in the background saying that President Trump was going to be holding a 2 p.m. press conference on China.
The president had promised a big announcement.
“There goes 500 point on the stock market,” I said in jest.
Of course, the stock market didn’t decline at all.
Once again, for the umpteenth time, I had predicted where the president would go, what he would say, or what he would do and been wrong.
Using the scorecard of hockey legend Wayne Gretsky, who famously suggested his success was based on going where the puck was going to be rather than where it had been, I have few hat tricks when it comes to my presidential predictions of the last three years.
But here’s why I missed this one: I thought Trump was going to tighten the screws on China. Like no previous president, Trump has taken an aggressive approach to China, both in threat and tariff.
China, once the United States' top trade partner has slipped to No. 3. U.S.-imports and exports have both fallen, imports more but exports more rapidly, over the last two years.
So, I thought he was going to stand up for the people of Hong Kong, for brave people who, at great risk, have stood up repeatedly for greater freedom by taking to the streets in protest.
I was, in essence, wrong.
The president in his press conference on China, announced he was leaving the World Health Organization, which he believes to be a patsy for China because of its handling of the coronavirus outbreak, and eliminate favorable tariff treatment for Hong Kong because, well, because, um, somehow that would hurt China.
The stock market, generally fearful of Trump’s moves that heighten tensions, was sending a clear signal: You whiffed and we’re OK with that.
I will leave the WHO decision to others but let’s look at U.S. trade with Hong Kong and see why his move is pure folly.
For the 11th straight year, the United States’ largest trade surplus in 2019 was with Hong Kong. While the significance of surpluses and deficits is often overplayed, in this case it actually matters.
Here’s why: The United States doesn’t import much from Hong Kong. Not much to send to the penalty box, it turns out.
In fact, 87% of every dollar of trade between the United States and the island that butts up against the Chinese mainland was a U.S. export in 2019. The U.S. average is 40 cents on the dollar.
Hong Kong ranked No. 22 for overall trade among U.S. trade partners in 2019 but ranked No. 15 for U.S. exports. It ranked ahead of Switzerland, Ireland, Italy, Vietnam, Australia, Thailand, Israel, Spain and Malaysia among others.
These exports will now no longer have preferential treatment when it comes to tariffs.
That’s because, under a U.S. law passed last year against an earlier effort by China to clamp down on unrest in Hong Kong, the State Department is required to certify annually whether Hong Kong remains autonomous, as per the terms of the United Kingdom’s withdrawal from its former territory at the end of the previous century. It has now indicated it will not do so.
While certainly some of the U.S. exports to Hong Kong find their way to China, this won’t help change that. In fact, it might actually ensure that some of those goods skip Hong Kong and go directly to China.
Let’s look at the other side, U.S. imports from Hong Kong.
Hong Kong ranked No. 50 for U.S. imports, behind Honduras, Iraq, Finland, Cambodia, the Dominican Republic, Bangladesh and Saudi Arabia. I don’t mean to slight these countries; merely to point out how less important Hong Kong is for U.S. imports than it is for exports.
If his target was China, President Trump didn’t go where the puck was going to be. And that makes a goal, at least by the great Gretsky’s measure, difficult to attain.
