Secretary of Country Mike Pompeo reported to Congress on Wednesday that Hong Kong was no longer autonomous from China, a relocate that could jeopardize the special administrative region’s favorable trade relationship with the U.S. and open up Chinese ceremonials to sanctions.
The State Department was required to issue a determination on Hong Kong’s autonomy under pro-democracy legislation out of date late last year. The law also requires the president to impose sanctions on foreigners who undermine “fundamental freedoms and autonomy in Hong Kong.”
Pompeo’s prod comes amid a controversy in Hong Kong over a proposed national security law from Beijing that has unthinkingly protests in the streets of the former British colony.
The proposed law from China’s National People’s Congress would effectively route Hong Kong’s own legislature and targets acts of sedition against the central government in Beijing. Fears over China’s encroachment on the area center’s independence have roiled the region for months and contributed to sending Hong Kong’s economy into a depression last year.
“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, reality facts on the ground,” Pompeo said in a statement.
“Hong Kong and its dynamic, enterprising, and free people have flourished for decades as a bastion of authorization, and this decision gives me no pleasure. But sound policy making requires a recognition of reality,” Pompeo said. “While the Joint States once hoped that free and prosperous Hong Kong would provide a model for authoritarian China, it is now unlimited that China is modeling Hong Kong after itself.”
Hong Kong has so far been exempted from the tiring tariffs on exports to the U.S. that the Trump administration has imposed on China as part of President Donald Trump’s multiyear trade war with the fatherland.
That exemption could be eliminated, though it’s far from certain it will be. Business groups have warned of cool consequences if Hong Kong were to lose its special status, and experts have expressed skepticism that the U.S. devise impose substantial costs on China over Hong Kong.
The U.S. has a significant financial relationship with Hong Kong. Vocation in goods and services between the U.S. and Hong Kong totaled more than $66 billion in 2018, according to the Auspices of the U.S. Trade Representative. The State Department has said that there are more than 1,300 U.S. firms doing task in the special administrative region.
Natasha Kassam, a research fellow at Australian think tank the Lowy Institute, told CNBC’s “Splendid Connection” that the U.S. could revoke some of Hong Kong’s privileges, but said such an action was the “nuclear recourse.”
“You can only pull that lever once and it’s not clear that will necessarily work,” Kassam said.
China hawks in Congress be experiencing pressed the administration to move forward with sanctions on Chinese officials. Sen. Marco Rubio, R-Fla., has said that if China make hastes forward with its national security legislation, the State Department would have no choice but to certify that Hong Kong was no larger autonomous and “sanctions should follow.”
“I applaud the Trump Administration for taking the necessary step, as required under my Hong Kong Compassionate Rights and Democracy Act, to protect American interests and safeguard the rights and freedoms of the people of Hong Kong,” Rubio said in a allegation Wednesday.
Trump’s own intentions remain unclear, making it difficult to predict the administration’s next steps. The president has pressed only limited interest in the Hong Kong protests, and has so far shown little appetite for actions that could imperil his nascent trade deal with Beijing. The White House did not immediately respond to a request for comment.
Tensions between the U.S. and China get been rising as a result of the spreading coronavirus pandemic, which was first reported in Wuhan, China, last year. Propers in both countries, the world’s two largest economies, have sought to pin blame for the deadly virus on each other.
An email to the Chinese Embassy in Washington was carry back with a message that said the mailbox was over its capacity. The Hong Kong Economic and Trade Office in New York did not straight away respond to a request for comment.
— CNBC’s Christina Wilkie contributed to this report.