Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Trump Signs HK Bill, China Vows to Retaliate. What's Next? Trump Signs HK Bill, China Vows to Retaliate. What's Next? Trump Signs HK Bill, China Vows to Retaliate. What's Next?

Trump Signs HK Bill, China Vows to Retaliate. What's Next?

Equities 4 minutes to read

Summary:  US President Donald Trump has signed the Hong Kong Human Rights and Democracy Act of 2019 into law. He also signed another bill banning the sale of ammunitions including tear gas and rubber bullets to Hong Kong police. A move that is sure to complicate ongoing trade negotiations and anger Chinese officials against the backdrop of an already fraught relationship between the US and China.

US President Donald Trump has signed the Hong Kong Human Rights and Democracy Act of 2019 into law. He also signed another bill banning the sale of ammunitions including tear gas and rubber bullets to Hong Kong police. A move that is sure to complicate ongoing trade negotiations and anger Chinese officials against the backdrop of an already fraught relationship between the US and China.

The bill, though largely symbolic in nature and somewhat toothless, stipulates annual reviews of Hong Kong’s special trade status and sanctions officials engaged in human rights abuses. But the problem is that for Beijing, this bill is viewed as interfering with internal affairs and they have previously threated to retaliate should the bill be signed.

This threat has again been reiterated today but lacked details of retaliatory proceedings with China saying the move to sign the bill violates international laws and aims to damage the practice of "one country, two systems,". A representative from the Ministry of Foreign Affairs tweeting, “US is a complete bully. Holding high the banner of "America first", it is only thinking about taking advantage of others. It raises tariffs whenever it likes. It abuses the monopoly status of US dollar while imposing unilateral sanctions & long-arm jurisdiction at every turn.”

As the news that Trump had signed the bill into effect broke this morning US futures and Asian indices exhibited a sharp risk off move, the yuan slid and yen, gold and treasuries were bid, despite US stocks making fresh record highs overnight. Despite China’s vows to retaliate the yuan fix, a key barometer of tensions between the two sides, was in line with estimates and raised by 78 pips relative to yesterday’s fix. Perhaps signalling that Beijing’s bark may be worse than their bite on this occasion.

Although there is no doubt this move will aggravate Beijing, congress essentially had a veto-proof majority and Trump had little choice but to sign the bill as it passed through the House on a 417-1 majority. The landslide win for pro-democracy candidates in Hong Kong earlier this week should also help US trade negotiators persuade Beijing that the bill shouldn’t derail ongoing negotiations as Trump’s hands were tied and that Hong Kong should be a separate issue to the interim deal. But as always this is further evidence that a partial/interim deal will only provide temporary relief from long-term bilateral tensions.

If US trade negotiators can persuade Beijing that the bill shouldn’t derail ongoing negotiations, although a bitter cup to drink, delaying the December 15th tariff hike could soften the blow for China. But given the recent rally in risk assets markets have priced in a great deal of hope and optimism around trade with equity markets largely priced for a phase one deal to be signed. This added uncertainty will see some of that complacency unwind somewhat, particularly given the shortened Thanksgiving trading week which likely sees traders eager to lock in some profits and wait to see how the story develops.

The key risk being that if China does retaliate and tie the Hong Kong bill to the partial trade deal, liquidity is thin given the shorter trading week, the VIX is compressed, a lot of optimism is priced, and valuations are stretched as equities have been fuelled by trade hope and multiple expansion not economic realities. Meaning a ratcheting higher in tensions could see some sharp downwards moves. Any Q4 2018 style meltdown would likely be avoided as we are dealing with a different Fed, rate hikes are no longer on the table and they have already kowtowed to the markets demands for liquidity. Not just the Fed, but globally central bankers have taken an accommodative stance. In Australia the RBA have delivered three rate cuts to date and we expect further easing will be delivered.

Given both the US and Chinese economies are now more visibly slowing than when talks broke down previously, there seems to be impetus on either side to close a partial deal so our base is that the signing of the Hong Kong bill will not derail negotiations. There is enough low hanging fruit to put together a watered-down deal, despite our long-held notion the two sides remain far apart on fundamental issues. We still maintain that China will concede little that is not within their own self-interest and the broad reaching core issues will remain unaddressed. However, an olive branch from Trump that defers the December 15th tariffs and a few more tweets about how imminent a deal is, likely sees dip buyers step in and risk off moves reversed.

Medium term we still maintain that growth continues to be buffeted by both cyclical and geopolitical headwinds, despite nascent signs of stabilisation. But this is not currently driving the tape action in markets. Improving sentiment has largely been propelled by “less bad news” and the Feds liquidity injections, but incoming data shows the synchronised global slowdown has persisted into Q4 and leading indicators are still deteriorating. OECD leading indicators remain weak across the globe highlighting that the recent stabilisation across manufacturing PMIs could be a false flag and it is too early to sound the all clear. When we cut through the headlines, it is clear the global economy continues to slow but the downdraft may be stabilising, so now is the time to be avidly data dependant. Whilst also remembering, a trade deal will not save late cycle dynamics from materialising. For the global economy to truly benefit from the any trade deal there needs to be a revival in animal spirits that reignite capex and manufacturing, thus arresting the bleed into the services sector where the bulk of employment sits. For that to happen there must be a comprehensive deal that covers a roll back of tariffs, removes uncertainty and reignites business confidence.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.