Trump’s escalated China tariff threat wipes away US$196 billion from Hong Kong stocks

Traders rotate out of stocks and into bonds on worries about entrenched inflation in the US and the Trump administration’s tariffs

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People gaze across Victoria Harbour from Kowloon. Photo: Eugene Lee

Published: 10:31am, 28 Feb 2025Updated: 4:39pm, 28 Feb 2025

Hong Kong stocks dropped by the most in more than three months on Friday, wiping away US$196 billion in market value, after US President Donald Trump said he would double the tariff on Chinese imports, escalating the trade war with Beijing and clouding the outlook for growth in the world’s two largest economies.

The Hang Seng Index slumped 3.3 per cent to 22,941.32 at the close, its most substantial decline since October 15. The fall trimmed the month’s gains to 13 per cent. The Hang Seng Tech Index tumbled 5.3 per cent for its worst single-day performance since October 8. On the mainland, the CSI 300 Index sand the Shanghai Composite Index both sank 2 per cent.

Chinese technology stocks that have been riding the DeepSeek wave led declines. Alibaba Group Holding, owner of the Post, sank 6 per cent to HK$127.50 and Tencent Holdings slid 3.4 per cent to HK$478.60. Meituan shed 6.3 per cent to HK$162 and Xiaomi dropped 2.4 per cent to HK$51.85.

Trump said on Truth Social that the US would apply an additional 10 per cent tariff on imports of Chinese goods, compounding the 10 per cent levy that was put in place when he took office. The president also said the 25 per cent tariffs on Canada and Mexico would be effective next week.

“The market hasn’t fully priced in the threat of Trump’s tariffs to China and to some extent [it] ignored the potential drag on the economy,” said Chen Meng, an analyst at Soochow Securities.

The new tariff risks stifling a rally in Chinese stocks that was spurred by a breakthrough in artificial intelligence (AI) technology by start-up DeepSeek, which launched a cheaper but high-performing chatbot that is competitive with ChatGPT. The Hang Seng Index has risen 14 per cent this year, making it the best performer among the major global gauges, while the Hang Seng Tech Index entered a bull market this month after clocking a 20 per cent gain from a January low.