Could Hong Kong Benefit from the Global Economic Turmoil Caused by Trump?

Since taking office, Trump first launched a global tariff war in April last year, and this year launched surprise attacks on Venezuela and Iran. As I write, the Middle East turmoil has caused oil prices to surge and global stock and financial markets to become turbulent; whether the war will continue to escalate or move toward de-escalation remains unclear. So far, the impact of the Middle East war on Hong Kong has not fully emerged; it still depends on the subsequent development of the war. However, financial markets respond the fastest and most sensitively. As Financial Secretary Paul Chan told the media, amid the Middle East conflict, funds have already been seen flowing into Hong Kong for safe haven.

Trump actually has a prior record of disrupting the global economy. Last April, Trump imposed so-called “reciprocal tariffs” on many countries around the world, sparking global financial turmoil; US and global stock markets fell in succession, shaking investors’ confidence in US and dollar assets, the US dollar fell on capital outflows, and gold prices surged accordingly; at that time, funds likewise flowed into Hong Kong for safe haven.

This article aims to analyse the impact on Hong Kong of the two global economic disruptions Trump has caused — the 2025 tariff war and today’s Middle East war. The tariff war has now lasted a year, and its impact on Hong Kong is relatively certain; the Middle East war is still under way, with no telling when it will end, its impact on Hong Kong is less certain, and whether it will be a blessing or a curse for Hong Kong is also harder to predict.

The Tariff War: Hong Kong Benefits from Misfortune

There are three reasons for Hong Kong’s surprisingly strong external trade performance. First, Mainland production chains have moved to Southeast Asia to avoid tariffs, using Hong Kong as a regional headquarters and production chain coordination centre, and the production chain’s logistics often pass through Hong Kong. Second, Hong Kong is the trade centre for cross-national electronic product production chains, and in recent years trade in artificial intelligence (AI) electronic products has grown rapidly. Finally, the resilience and flexibility of local manufacturers, and the high efficiency of Hong Kong’s trade centre, stand out particularly in troubled times and when “rushing to export” in the face of tariff barriers. The so-called “rushing to export” refers to manufacturers hoping to export before tariffs take effect. A trade centre that can handle customs declarations and ship export products to their destinations quickly has a huge advantage in the “rushing to export” operation.

On the financial market side, Trump changes his orders from one day to the next and uses “long-arm jurisdiction” heavy-handedly, and the risk of dollar assets has therefore risen sharply; safe-haven assets have accordingly flowed into Hong Kong in large volumes. Data from Emerging Portfolio Fund Research (EPFR) shows that from the turmoil caused by Trump imposing so-called “reciprocal tariffs” in April 2025 to July, in just three months, investment funds net-poured approximately US$91.5 billion into Asian markets; of that, approximately US$44.3 billion in net funds flowed into the China market, most of it into Hong Kong. Recently, international financial institutions have been actively expanding their business in Hong Kong; Hong Kong is expected to become the world’s largest wealth management centre in the coming years, and there is even a trend of replacing London to become the world’s second-largest financial centre. In addition, the rising risk of dollar assets is precisely a good opportunity to promote the internationalisation of the renminbi. And Hong Kong, the world’s largest offshore renminbi hub, is the main battleground for promoting renminbi internationalisation.

A Free-Trade Hub and International Financial Centre in Troubled Times

There are three reasons for Hong Kong’s surprisingly strong external trade performance: First, Mainland production chains have moved to Southeast Asia to avoid tariffs, using Hong Kong as a regional headquarters and production chain coordination centre, and the production chain’s logistics often pass through Hong Kong; second, Hong Kong is the trade centre for cross-national electronic product production chains, and in recent years trade in AI electronic products has grown rapidly; finally, the resilience and flexibility of Hong Kong manufacturers, and the high efficiency of Hong Kong’s trade centre, stand out particularly in troubled times and when “rushing to export” in the face of tariff barriers. The so-called “rushing to export” refers to manufacturers hoping to export before tariffs take effect; a trade centre that can handle customs declarations and ship export products to their destinations quickly has a huge advantage in the “rushing to export” operation.

On the financial market side, Trump changes his orders from one day to the next and uses long-arm jurisdiction heavy-handedly, and the risk of dollar assets has therefore risen sharply; safe-haven assets have accordingly flowed into Hong Kong in large volumes. Data from Emerging Portfolio Fund Research (EPFR) shows that from the turmoil caused by Trump imposing so-called “reciprocal tariffs” in April 2025 to July, in just three months, investment funds net-poured approximately US$91.5 billion into Asian markets, of which approximately US$44.3 billion in net funds flowed into the China market, most of it into Hong Kong. Recently, international financial institutions have been actively expanding their business in Hong Kong; Hong Kong is expected to become the world’s largest wealth management centre in the coming years, and there is even a trend of replacing London to become the world’s second-largest financial centre. In addition, the rising risk of dollar assets is precisely a good opportunity to promote the internationalisation of the renminbi; and Hong Kong, the world’s largest offshore renminbi hub, is the main battleground for promoting renminbi internationalisation.

The Blessings and Curses of Middle East Conflict for Hong Kong

The adverse impact of the Middle East war on Hong Kong is obvious. The war has caused oil prices to rise sharply, and Hong Kong’s energy structure remains highly dependent on fossil fuels, so electricity tariffs and transportation costs both face upward pressure. In addition, if the Middle East war cannot be ended for a long time, global and US inflation will rise, and the US and other countries will need to maintain relatively high interest rates; the trend of US interest-rate cuts will halt or even reverse. Under the linked exchange rate, the trend of Hong Kong interest-rate cuts will likewise halt or even reverse. Hong Kong’s property market has only just recovered from the crisis; if interest rates unfortunately reverse, the recovery will likely be hard to sustain. In the worst case, oil prices staying high for a long time could cause global stagflation — that is, economic recession occurring at the same time as inflation — and its economic consequences could be very serious.

In this Middle East war, the country most devastated by the war is naturally Iran, followed probably by the UAE. The six Gulf states — the UAE, Saudi Arabia, Qatar, Bahrain, Oman and Kuwait — are allied with the United States, allowing the US to station troops there, hoping the US can safeguard security in the Gulf region and counter the Iranian threat. Economically, the six Gulf states also work closely with the United States, with cooperation covering oil trade, investment and technology; the six states hope that, through investment and technological cooperation with the US, they can develop diversified economies and thereby break free from dependence on oil.

Before the outbreak of this Middle East war, the six Gulf states’ economic development was thriving; not only did their GDP per capita rank among the world’s top, their development in tourism, air transport, solar energy, and even AI and finance was a refreshing surprise. Among them, the UAE has become an international financial centre in the Middle East region and has been rated the most successful case of economic development among the six Gulf states. Dubai International Airport in the UAE has long ranked first in the world for international passengers. In 2024, the airport served more than 92 million international passengers, 1.7 times that of Hong Kong International Airport in the same year.

A stable and secure environment is extremely important for an international financial, trade, shipping and tourism hub. This Middle East war, on the one hand, has severely damaged the UAE’s investment environment; on the other hand, it has highlighted the advantages of Hong Kong and Singapore. Capital flowing from the UAE into Hong Kong is therefore only to be expected.

In this Middle East war, the United States has not only failed to protect the six Gulf states, it has also been unable to win a quick victory. Trump’s “nervous knife” has accelerated the decline of US hegemony. The world will move from unipolar to multipolar, and factors of instability will increase. Fortunately, Hong Kong has the country’s “steadying anchor” behind it, and will become a safe harbour in troubled times.

Conclusion

For Hong Kong, if the Middle East war drags on and oil prices stay high in the long term, the disadvantages are likely to outweigh the advantages. However, from a fundamentals perspective, global oil supply is actually quite ample. If therefore the Middle East war ends in the short term and the Strait of Hormuz resumes transporting oil, oil prices will fall sharply; the adverse impact of high oil prices on Hong Kong will be rather short-lived.

As for the UAE, even if the Middle East war ends in the short term, investors will still have doubts about whether the Gulf region can maintain long-term peace and stability. The six Gulf states have discovered that allying with the United States and allowing US troops to be stationed there not only fails to guarantee their own security, but makes them a target. They have also discovered that, for the United States, the security of Israel is the most important, and the security of the six Gulf states is clearly secondary; it is possible that, for the sake of Israel’s interests, the six states have become a target. The six states will therefore strengthen their own armaments and seek other allies besides the United States to provide security. China is the world’s second-largest economy of considerable weight, and it is estimated that the six Gulf states will strengthen diplomatic and economic ties with China, from which Hong Kong will benefit. Gulf-region geopolitics will enter a period of restructuring, exploration and instability, and will for a long time highlight the advantages of Hong Kong as a financial centre and economic-trade hub.

The impact of the Middle East war on Hong Kong is very complex: the Middle East is not a major market for Hong Kong, and if the war ends in the short term, the adverse impact of high oil prices on Hong Kong will be limited; the current momentum of Hong Kong’s economic recovery is believed to be sustainable. In the long run, as a safe harbour in troubled times, the benefits Hong Kong gains may exceed the damage caused by short-term high oil prices.

All in all, in an international environment of proliferating tariff barriers, turbulent financial markets, and high winds and rough waves, Hong Kong’s status as a free port, its stable economic, trade and financial policies, and its sound monetary, exchange-rate and fiscal systems have highlighted Hong Kong’s special position as an international financial centre and economic-trade hub. In the past, Hong Kong has weathered many storms by virtue of its resilience, adaptability and flexibility. Facing today’s troubled times, Hong Kong people must all the more maintain their composure, resilience and flexibility.