WASHINGTON - Billions of dollars in trade are hanging in the balance as U.S. lawmakers consider suspending Hong Kong's special trading status after the State Department said it could no longer certify the territory's high degree of autonomy from China.

After China took control of Hong Kong from Britain in 1997, Hong Kong's economy remained one of the freest in the world, attracting billions of dollars in investment and becoming a home base for companies and banks across Asia.

Now, all of that is uncertain with Beijing's passage of a new National Security Law that undercuts Hong Kong's special status and would allow Chinese security agencies to limit the liberties of Hong Kong residents. Hong Kong is already facing a deep recession because of the impact of the COVID-19 outbreak on trade and tourism.

Rajiv Biswas, executive director and Asia-Pacific chief economist at IHS Markit, told VOA that suspending Hong Kong's special status could end favorable tariff treatment and other economic benefits that have made the region a global hub of investment.

"This could erode Hong Kong [Special Administrative Region's] competitiveness as an export hub and international financial center, as well as its role as a regional headquartering hub for multinationals," Biswas said.

Hong Kong is critical to China's economy, as a gateway to foreign investors, a stock exchange that allows Chinese companies to raise funds, and a regional base for mainland companies. But the U.S. rule change will likely have little impact on Chinese businesses directly, said economist Nicholas Lardy at the Peterson Institute for International Economics in Washington during a webinar Wednesday.

"This is an example of where there's no weighing of the costs and benefits," he said. "We want to impose some costs on China. If we go down this road, the main losers would be the U.S. companies and the citizens of Hong Kong, and I don't know why we want to punish the citizens of Hong Kong for something that the government in Beijing is doing."

What's at stake

As of June 2018, more than 1,300 American companies have had business operations in Hong Kong, including nearly every major U.S. financial firm and about 290 regional headquarters with parent organizations in the United States, according to U.S. government data.

An analysis from Reuters shows that about $67 billion in annual U.S.-Hong Kong trade of goods and services could be put at risk if Hong Kong loses its preferential lower U.S. tariff rate.

The State Department said 85,000 U.S. citizens lived in Hong Kong in 2018.

According to the U.S. Census Bureau, Hong Kong was the source of the largest bilateral U.S. goods trade surplus last year at $26.1 billion.

The U.S. Senate proposed a bipartisan bill last week that would sanction officials and entities involved in the execution of new national security laws in Hong Kong and penalize banks that do businesses with those entities.

The Trump administration is also reportedly crafting a range of options to punish China over its tightening grip on Hong Kong, including targeted sanctions, new tariffs and further restrictions on Chinese companies. Such moves could mark the opening salvos of the U.S. response as President Donald Trump weighs how far he is prepared to go.

The U.S. Chamber of Commerce, which represents U.S. business and investment interests, issued a statement Tuesday calling on the Chinese government to maintain Hong Kong's "one country, two systems" framework, while calling on the Trump administration to continue to seek constructive relations with Hong Kong.

"It would be a serious mistake on many levels to jeopardize Hong Kong's special status, which is fundamental to its role as an attractive investment destination and international financial hub," it said in the statement.

Adrianna Zhang contributed to this report.