Hong Kong economy cools as trade tension mounts

HONG KONG (AP) — Hong Kong's economic growth slowed in the latest quarter and the government warned it could face headwinds from U.S.-Chinese trade tension and higher interest rates.

Government data Friday showed the Chinese territory's economy expanded by 2.9 percent over a year earlier, down from the previous quarter's 3.5 percent.

Exports rose 5 percent over a year earlier, but the government said the impact of trade tension and weaker global demand "has begun to surface" and is "likely to become more apparent in the near-term."

The government said Hong Kong also faces a drag from higher interest rates. The Hong Kong dollar has a fixed exchange rate with the U.S. dollar, which requires the central bank to raise interest rates along with the U.S. Federal Reserve even though economic growth is slowing.