Hong Kong stocks fell after US trade deals with Vietnam and other trading partners showed Washington was putting hurdles in place to curb Chinese goods shipped from offshore factories, potentially heightening trade tensions.

The Hang Seng Index dropped 0.6 per cent to 24,069.94 on Thursday, erasing most of the gain on Wednesday. The Hang Seng Tech Index slipped 0.7 per cent. On the mainland, the Shanghai Composite Index advanced 0.2 per cent and the CSI 300 Index rose 0.6 per cent.

Smartphone and car maker Xiaomi slumped 3.4 per cent to HK$58.10 while WeChat operator Tencent lost 0.1 per cent to HK$501. E-commerce leader Alibaba Group slid 2.9 per cent to HK$106.20 after it announced a big subsidy programme to boost user and merchant incentives, escalating competition with JD.com and Meituan. JD.com dropped 2.1 per cent to HK$125.30, while Meituan slipped 2.5 per cent to HK$122.80.

The US will impose a 20 per cent tariff on Vietnamese exports and slap a 40 per cent levy on goods deemed to be transshipped through the Southeast Asian country, US President Donald Trump said on his social media. Vietnam agreed to drop all tariffs on US imports in the deal struck before the July 9 deadline, he added.

“It negatively affects China’s exports, forcing Chinese firms to relocate factories overseas, if other deals follows this mode,” said Gary Ng, a senior economist at Natixis Corporate and Investment Bank. “The impact will also depend on the definition of transshipment and the tolerance for ‘made-in-China’ inputs, which is unclear for now.”

The Trump administration’s tiered approach was also evident in the agreements with Canada and Mexico, a move that could hurt US-bound Chinese goods – mainly assembly parts – produced in offshore manufacturing bases to overcome punitive tariffs on direct exports from China.

Elsewhere, Cloudbreak Pharma slumped 39 per cent to HK$6.20 on the company’s trading debut.