Hong Kong freight sector reels under US-China tariff war

[WORLD] Escalating trade frictions between the United States and China are taking a heavy toll on Hong Kong, long a critical conduit for goods flowing between the two economic superpowers. The city's freight forwarding industry—once a cornerstone of its trade infrastructure—is facing sharp declines as businesses reroute shipments to bypass tariffs or relocate production altogether. The shift jeopardizes a sector that last year accounted for nearly one-fifth of Hong Kong’s total trade volume.

New figures from the Hong Kong Shippers’ Council show a 12% year-on-year drop in re-export volumes for the first quarter—the steepest quarterly decline since the global financial crisis in 2008. Industry observers attribute the downturn not only to rising trade barriers but also to faltering global demand, as inflation in Western markets continues to curb consumer appetite for Chinese-made products. This dual strain of protectionism and economic slowdown is pushing many logistics firms to the brink.

The downturn is reverberating through adjacent sectors, including warehousing, shipping, and logistics services. Smaller freight forwarders, many of whom depend heavily on China-U.S. trade lanes, have begun scaling back operations or exiting the market altogether. Larger players are taking preemptive steps to diversify their operations, with growing interest in Southeast Asia and Europe as alternative trade corridors.

One such firm, Orient Overseas Container Line, recently announced plans to boost shipments to Southeast Asia by 30% this year, diverting resources away from the trans-Pacific routes. “The days of relying exclusively on China-U.S. trade are over,” a senior executive at the company remarked under condition of anonymity. “Firms that don’t evolve will be left behind.”

The pressure has intensified with the latest round of U.S. tariffs—targeting products such as electric vehicles and semiconductors—coming into force earlier this month. The Biden administration has defended the new duties as essential to safeguarding American industries, while Beijing has pledged countermeasures, fueling concerns of a prolonged trade standoff.

China’s Commerce Ministry has hinted at possible retaliatory steps beyond tariffs, including stricter customs inspections on U.S. agricultural imports, a move that could further strain already disrupted global supply chains. At the same time, Chinese exporters are increasingly eyeing European and Latin American markets, though analysts warn these regions are unlikely to fully compensate for the loss of U.S. demand.

Despite mounting pressure, the Hong Kong government has yet to roll out targeted support for the logistics sector. A spokesperson for the Trade and Industry Department said officials are “closely monitoring the situation” and considering options to assist affected businesses. However, critics argue that without timely and decisive action, Hong Kong could lose ground to regional rivals such as Singapore and Shenzhen, both of which are rapidly upgrading their logistics infrastructure.

In a recent legislative session, pro-business lawmakers called on the government to accelerate subsidies for firms investing in automation and sustainable logistics. “Hong Kong must modernize or risk fading into irrelevance,” one legislator warned, citing Shenzhen’s swift embrace of AI-powered supply chain solutions.

In the face of ongoing uncertainty, some industry leaders are urging deeper regional collaboration. They argue that Hong Kong should leverage its strengths in finance and legal services to help companies navigate the complexities of evolving trade networks. Others highlight the need for innovation, such as expanding digital customs clearance systems and lowering operational costs through technology.

The Hong Kong Logistics Association has proposed the creation of a public-private task force to spearhead the response, including expedited visa schemes for logistics professionals and tax incentives for firms relocating regional headquarters to the city. “This calls for a unified, strategic approach—not fragmented fixes,” the association’s chairman said at a recent press conference.

As the global trade landscape continues to shift, Hong Kong’s freight forwarding sector stands at a crossroads. Its ability to adapt will determine whether the city retains its strategic role in international commerce or is sidelined by emerging economic dynamics.