What: Despite initial market turmoil from Trump's tariff policies, Hong Kong emerges as a potential beneficiary of the US-China trade war, leveraging its position as the only viable platform for Chinese companies seeking international expansion.

Why it is important: While Trump's tariffs have disrupted traditional trade patterns, Hong Kong's resilience and adaptation highlight the emergence of new business models and opportunities in the shifting landscape of global commerce.

As Trump's tariff policies trigger market turbulence, Hong Kong's business elite maintains an unexpected calm amid the chaos. The Hang Seng index's 13% drop following "Liberation Day" masks a potential silver lining for the territory. After years of losing ground to rival commercial centres, the realignment of global business presents opportunities for Hong Kong to reclaim its position. The city's unique advantage lies in providing Chinese companies access to international markets and expertise while offering foreign investors a gateway to Chinese growth opportunities. This comes at a crucial time when mainland firms seek overseas expansion but face increasing hostility in traditional markets like New York. Recent developments, including major share offerings by companies like BYD and Xiaomi, suggest Hong Kong's capital markets are already benefiting from this shift, though challenges remain in an increasingly complex global trade environment.

IADS Notes: The Economist's analysis of Hong Kong's potential resurgence amid trade tensions gains credibility when viewed alongside recent market developments. As reported in April 2025, while retail sales dropped 13% despite increased visitor numbers, this apparent contradiction masks a fundamental transformation in the city's role. The implementation of multiple-entry visas for Shenzhen residents in March 2025 has made over 10 million people eligible for frequent visits, though spending patterns have shifted dramatically from traditional shopping to experience-based tourism. This evolution is evidenced by major luxury brands' strategic responses, with Louis Vuitton and Chanel expanding their presence in August 2024 through experiential retail formats. Despite competition from Hainan island's duty-free hub, Hong Kong's prime retail rents are projected to grow by 3% annually over the next five years, suggesting confidence in its long-term prospects. The city's transformation extends beyond retail, as February 2025 data shows it emerging as the preferred platform for Chinese companies seeking international expansion, particularly as Trump's "Liberation Day" tariffs of up to 50% reshape global trade dynamics.

The trade war may reverse Hong Kong’s commercial decline