The Chief Executive, Carrie Lam, said on Tuesday that the passage of the Hong Kong Human Rights and Democracy Act in Washington has created "an unstable environment" in the SAR, affecting business confidence.
The bill was signed into law by US President Donald Trump last week, in an apparent move to support the ongoing pro-democracy protesters in the city.
The act requires the US president to annually review Hong Kong's favourable trade status and threatens to revoke this if the SAR's freedoms are undermined.
Speaking ahead of the weekly Executive Council meeting, the Chief Executive said the SAR government strongly objects to the act, saying it's unnecessary and unjustifiable.
Lam said the move is a clear interference in Hong Kong's internal affairs, adding that the human rights of Hongkongers have been protected by the Basic Law.
She also questioned claims that people in Hong Kong feel their rights are being infringed upon, saying they still enjoy press freedom, religious freedom and freedom of assembly.
The CE added that the exact impact of the act on Hong Kong depends on what US authorities do upon their annual reviews, and this uncertainty has created "an unstable environment" in the SAR. She said business confidence has been hit because firms worry about what Washington will do.
She said some major chambers are also opposed to the act, and some US companies think it has harmed their businesses.
As for Beijing's latest punitive measures against the United States, Lam said the SAR will cooperate as usual with the Ministry of Foreign Affairs over sanctions against some NGOs and the suspension of US warship visits to Hong Kong.
The CE also said the government will soon introduce a fourth round of relief measures to help people cope with the economic downturn. She said she expects the unemployment rate to increase further, after retail sales suffered the largest drop on record in October.