Hong Kong's cargo sector impacted by US-China tensions

Hong Kong remains a crucial hub for air cargo, handling over 4.3 million tonnes last year. The city connects China’s manufacturing industry with global markets. However, its strategic location makes it vulnerable to rising tensions between the US and China and the effects of tariffs from the Trump administration. Multinational companies rely heavily on Hong Kong for warehousing and distribution. Major logistics providers, like UPS, and airlines such as Cathay Pacific, use the city as a vital trans-shipment point. Cathay Pacific has seen significant cargo revenue growth, which now accounts for more than a quarter of its total earnings. Demand for cargo, especially from e-commerce and the electronics sector, has been strong. However, rising tariffs and scrutiny on Chinese exports pose risks to Hong Kong's air cargo sector. These tariffs can increase trade costs, making air freight less affordable. Companies might opt for slower transport methods, like shipping or trucking, to save money. If businesses diversify their supply chains to mitigate geopolitical risks, it could lead to reduced cargo volumes in Hong Kong. This shift might also lower demand for business travel, impacting airlines that serve US-China routes. Despite these challenges, Hong Kong remains essential for global logistics. Cathay Pacific has enjoyed a revenue increase, with shares rising over the past six months. However, the future of Hong Kong's cargo sector depends on broader geopolitical trends, with significant influence from US policies.