US President Donald Trump's incoming policies are casting a shadow over business confidence among small and medium-sized enterprises (SMEs) in the city, an economist said on Thursday.

Kelvin Lau, a senior economist at Standard Chartered Bank, said Washington has contributed to global economic uncertainties.

"One of the biggest uncertainties recently is the retrenchment of US rate cut expectations. Secondly, it's the uncertainty around Trump's tariffs, how fast and how far he would take them higher," Lau said.

According to the results of a Productivity Council survey, the Standard Chartered Hong Kong SME Leading Business Index fell to 42.8 in the January-to-March period, down 2.9 points from the previous three months. Figures below 50 indicate a negative outlook, while those above 50 show a positive one.

The drop indicated the overall business confidence of local SMEs "has become more conservative under the uncertain global economic outlook", the council said.

Of the more than 800 local firms polled, around 38 percent said the US presidential transition had affected their business confidence.

They cited potential tariffs and changes in the economic environment as primary factors. Trump had warned of imposing a 10 percent duty on Chinese imports as soon as February 1.

“A lot of things are less to do with local issues, but more to do with external issues. But then the downside is, because it's external, there are a very few things that we can actually control about it," Lau said.

“We're just hoping that we can also benefit from more policy easing from the US and from China as well. Hopefully the achievement of a global soft landing will help Hong Kong maintain a modest pace of recovery."

Lau added that the first round of potential tariffs would be "in line with market expectations", and further hikes, which might not come until 2026, would bring more certainty to enterprises.