(Bloomberg) -- Donald Trump signed legislation expressing U.S. support for Hong Kong protesters, prompting China to threaten retaliation just as the two nations get close to signing a phase one trade deal.
China summoned U.S. Ambassador Terry Branstad, with Vice Foreign Minister Le Yucheng telling him to stop meddling in Hong Kong affairs. He warned that such actions would strain ties and risk affecting “cooperation in important areas,” according to a foreign ministry statement, which didn’t give more details. Earlier, the foreign ministry reiterated threats of retaliation with no specifics.
The bill requires annual reviews of Hong Kong’s special trade status under American law, as well as sanctions against any officials deemed responsible for human rights abuses or undermining the city’s autonomy. A second Hong Kong measure also bans the export of crowd-control items such as tear gas and rubber bullets to the city’s police.
While signing the bills, Trump signaled that he didn’t want the broader relationship with China to veer off track. He expressed concerns with unspecified portions of the new law, saying they risked interfering with his constitutional authority to carry out American foreign policy.
“I signed these bills out of respect for President Xi, China, and the people of Hong Kong,” the president said in a statement Wednesday. “They are being enacted in the hope that leaders and representatives of China and Hong Kong will be able to amicably settle their differences leading to long term peace and prosperity for all.”
Asian stocks were mixed and U.S. futures slid after Trump signed the bill, while the yen nudged higher and the yuan lower. Hong Kong shares were among the worst performers, though declines were still modest at the open.
Investors are looking for any sign that measure will prevent the world’s biggest economies from reaching a deal that could deescalate a trade war that’s dragged on for 20 months. Trump on Tuesday said the two sides were in the “final throes” of a deal that would start to unwind tariffs on about $500 billion in products traded between them.
Trump would like the agreement finished in order to ease economic uncertainty for his re-election campaign in 2020, and he has floated the possibility of signing the deal in a farm state as an acknowledgment of the constituency that’s borne the brunt of retaliatory Chinese tariffs. China is also looking to avoid further damage to an economy growing at the slowest pace in decades.
‘Xi Wants a Deal’
China is irked that the bill will bolster Hong Kong protesters who have become increasingly violent in their bid to secure demands including an independent inquiry into police abuses and meaningful elections, but it probably won’t affect trade talks much, said David Zweig, an emeritus professor at the Hong Kong University of Science and Technology and director of Transnational China Consulting Ltd.
“This is not a fundamental challenge to U.S.-China trade negotiations,” he said. “It’s another notch in U.S.-China hostility, it’s Congress being more assertive than usual, but I think it will be a short-term response, not even a medium-term response. Xi wants a deal, I think.”
Hong Kong’s protesters cheered the bill’s passage, and plan to rally in the central financial district on Thursday evening. Joshua Wong, one of the most high-profile activists, lauded Trump for signing it into law and also called on police to retreat from Hong Kong Polytechnic University, where a few demonstrators are left after a nearly two-week siege. Police have said they aren’t sending in officers in riot gear.
Trump had little choice but to sign the bill: The House cleared it 417-1 on Nov. 20 after the Senate passed it without opposition, majorities that would allow lawmakers to override any veto by the president.
Senator Marco Rubio, a Florida Republican, said the law, S. 1838, would give the U.S. “meaningful tools to deter further influence and interference from Beijing into Hong Kong’s internal affairs.” Speaker Nancy Pelosi said it was crucial for the U.S. to speak up.
“If America does not speak out for human rights in China because of commercial interests, we lose all moral authority to speak out elsewhere,” she said in a statement.
“In an overwhelming display of bipartisan unity, Congress passed our Hong Kong Human Rights and Democracy Act, and I applaud President Trump for signing this critical legislation into law,” Rubio said in a statement. “I look forward to continuing to work with the administration to implement this law.”
While many members of Congress in both parties had voiced strong support for the protesters who are demanding greater autonomy for the city, Trump stayed largely silent, even as the demonstrations have been met by rising police violence.
Last week, Senate Majority Leader Mitch McConnell, a Kentucky Republican, called on the president to speak out, saying that “the world should hear from him directly that the United States stands with” the protesters.
China’s foreign ministry had repeatedly urged Trump to prevent the legislation from becoming law, warning the Americans not to underestimate China’s determination to defend its “sovereignty, security and development interests.” Chinese Vice Foreign Minister Zheng Zeguang summoned the U.S. ambassador, Terry Branstad, on Monday to express “strong opposition” to what the country’s government considers American interference in the protests, including the legislation, according to statement.
U.S. and Chinese trade negotiators will continue communicating closely and work toward a phase one deal, Ministry of Commerce spokesman Gao Feng said at a briefing in Beijing on Thursday.
Before a speech at the Bloomberg New Economy Forum in Beijing last week, China’s Vice Premier Liu He -- the country’s chief trade negotiator -- said that he was “cautiously optimistic” about reaching the phase one accord, according to people who attended a dinner and asked not to be identified.
(Updates with China summoning US ambassador)