The vote by the senate came as investors were already growing nervous about the lack of solid news on negotiations for a mini tariffs pact to help resolve a debilitating and long-running standoff between the economic superpowers.
China was already angered and expressed “strong indignation” last month when the US House of Representatives passed a similar measure.
The bill, which must be signed off by Donald Trump, supports “human rights and democracy” in Hong Kong and threatens to revoke its special economic status as lawmakers grow concerned about an increasingly tough crackdown on the months-long protests.
It would require the president to annually review the favourable trade status Washington grants to the city and allows for sanctions against Hong Kong and Chinese officials who commit human rights abuses including “extrajudicial rendition”.
While observers broadly expect the two sides to eventually hammer out some sort of agreement as part of a wider pact, there have been a number of bumps in the road, causing anxiety on equity markets.
And Vice President Mike Pence warned Tuesday that the Hong Kong situation could complicate any deal. However, AxiTrader’s Stephen Innes said Trump “has been conspicuous by his silence when it comes to the Hong Kong chaotic escalation.
Perhaps Trump sees a trade deal with Beijing as a more significant priority as he makes his case for re-election and doesn’t want the Hong Kong bill to act as a stumbling block”.
But he added that the passage of the bill would make it hard for him to “hold out against this bipartisan pressure, which could put another snag in the trade talk lines”.
Adding to the unease, Trump again raised the spectre of more levies on Chinese goods, warning Tuesday: “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”
In early trade Hong Kong was down 0.8 per cent and Shanghai fell 0.2 per cent, while Tokyo finished the morning session down 0.7 per cent Singapore shed 0.5 per cent, Seoul sank 0.9 per cent and Taipei lost 0.3 per cent. Manila and Jakarta also fell.