U.S. Action On China’s Hong Kong Sanctions May Impact Ongoing Trade Negotiations

China’s crackdown on Hong Kong’s autonomy may impact the ongoing trade negotiations between the U.S. and China. The White House is said to be weighing sanctions on the country in response to a “national security law” that could undermine Hong Kong’s independence—the “one country, two systems” principle, formulated when Hong Kong transferred from British to Chinese control in 1997, is supposed to guarantee the city’s economic and administrative independence until 2047.

Speaking to reporters earlier this week regarding China, President Trump said, “It is something you're going to be hearing about before the end of the week. Very powerfully, I think.”

A bipartisan effort in the U.S. Senate also seeks to levy sanctions on financial institutions both within and outside China that conduct business with individuals involved in the implementation of the national security law. Sen. Pat Toomey, one of the bill’s sponsors, told reporters this week: "Although it's not a democratic society, the government is certainly subject to political pressure, and when the business interests and financial interests realize this tool can be deployed, I think there's going to be a whole new level of pressure on the government not to trigger this kind of response.”

The U.S.-China Phase One Economic and Trade Agreement is still in place, and last week, the U.S. Department of Agriculture and the Office of the U.S. Trade Representative announced additional progress in the implementation of the agriculture-related provisions of the agreement.

White House Economic Advisor Larry Kudlow has noted that while the trade agreement remains in place, it has become somewhat overshadowed by concerns regarding the coronavirus and the crackdown on Hong Kong, and the president may be open to actions on those issues that undermine the agreement. On Fox News on Tuesday, Kudlow said, “The trade deal is not as important to him as it once was.”

filed under May 2020
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