While revoking Hong Kong’s preferential treatment may be catastrophic for the city’s financial system, the move could also backfire on the US itself and even challenge the dollar, Boom Bust has learned.

On Friday, US President Donald Trump said he would end the special trade relationship with Hong Kong and impose sanctions on Chinese officials who backed the recent national security law. For the former British colony, the move could mean that it will become subject to US tariffs on China and lead to the city’s demise as one of the major global financial hubs.

“Most importantly there is a free exchange of Hong Kong dollars for US dollars, so if the US moves to restrict the Hong Kong monetary authorities’ access to the US dollar, that is actually the extreme nuclear option on the table,” noted Boom Bust co-host Christy Ai.

However, banning Hong Kong from clearing US dollars is “a double-edged sword” that may significantly harm Washington’s interests. The city would have to seek an alternative to the greenback and turn to the euro, or the yuan (officially known as the renminbi, abbreviated to RMB).

“The last thing the US wants right now is for the RMB to gain even more global prominence,” the correspondent added.

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