President Donald Trump signed legislation on Tuesday that allows him to sanction banks, businesses and officials involved in helping China impose a controversial new security law on Hong Kong.
Along with enacting the sanctions bill, Trump also signed an executive order rescinding Hong Kong’s special trading status, which facilitated trade between the city and the U.S. China has already vowed to retaliate over the measures.
“Hong Kong will now be treated the same as mainland China: no special privileges, no special economic treatment, and no export of sensitive technologies,” Trump told reporters Tuesday.
The moves mark an escalation in political and economic tensions between the two superpowers that have heated up since China passed its Hong Kong security law last month. The Chinese law severely restricts civil liberties and free speech in the semi-autonomous city.
“Now that the president has signed our Hong Kong Autonomy Act into law, he must impose the sanctions included in our bill. That is the only way to ensure that those involved in the crackdown on Hong Kong will feel the full consequences of their actions," said Sen. Chris Van Hollen of Maryland, a Democrat who sponsored the sanctions legislation.
Hong Kong has served for decades as a vital trading link between Western democracies and China. The territory’s currency is pegged to the U.S. dollar, and many global firms use the city as a base for their Asia operations.
Multinational financial institutions have been caught in the crossfire over the new security bill, with banks such as HSBC and Standard Chartered that have publicly supported the bill being condemned by Western lawmakers. Those banks could face sanctions under the new U.S. law.
Other banks, such as Japan’s Nomura and Australia’s Macquarie, are reportedly considering pulling back their Hong Kong operations. If the city falls under Chinese laws and regulations, having a Hong Kong operation will be no more valuable to foreign firms than maintaining offices in Shenzhen or Shanghai.
Over a third of American companies in Hong Kong plan to move assets out of the city following the passage of the security law, according to a survey released this week by the American Chamber of Commerce in Hong Kong. Over half of respondents said the law would affect their ability to hire talent in the city.
China’s Foreign Ministry said on Wednesday that it would announce sanctions in response to the U.S. legislation.
“In order to safeguard its legitimate interests, China will make necessary response [sic] and sanction the relevant individuals and entities of the United States,” Chinese Foreign Ministry spokesperson Hua Chunying said. She did not specify which individuals or entities would be targeted.
Separately, China said Tuesday that it would sanction U.S. aerospace and defense giant Lockheed Martin over its role in a $620 million American arms deal with Taiwan, though the spokesperson who announced the sanctions did not provide additional details.
The U.S. sanctions legislation was passed unanimously in both the House and Senate earlier this month, signaling broad support in both parties for a crackdown on China.
“These new, mandatory, and punishing sanctions on those who undermine Hong Kong's autonomy shows the communists in Beijing, and the world, that America stands with Hong Kong,” said Sen. Pat Toomey of Pennsylvania, a Republican who sponsored the sanctions legislation along with Van Hollen.