Impact of the policy if US go full nuclear is that CHina relies on Hong Kong for -
Foreign Direct Investment - It's a gateway for foreigners and foreign companies to expand into China... Impact will be less foreign investment, but also American companies will also suffer from being unable to tap the China marekt, for example Apple 15% of Apple's revenue is from sales in China accounting for almost $14B USD.
Stock trading - Chinese companies list on the Hong Kong stock exchange to access financing from abroad - Impact is foreiengers won;t be able to invest in those companies (Some Chinese companies have listed in US stock exchamges though, but Trump is looking to get some of them delisted). The chinses copanies won;t be able to get the investment.
Chinese banks store a lot of their money in Hong Kong to be able to move it around globally a lot easier - Impact, operations of Chinese banks will be limited.
Devt markets - Chinese companies tap into Hong Kongs debt marklet for offshore US Dollar funding. Impact - absence f debt marekt means, those companies won;t be able to access another route of financing.
What does that mean for Hong Kongers - less jobs, less opportunities, less incentive for China to at least have some modicum of 1C2S, since Hong Kong's value will be depreciated.
What does that mean for China businesses, they will reloacate their cross border financing activities elsewhere, likely SIngapore, ergo the short term impact maybe high, but the medium term is likely low, since there will be many cities that will want the opportunity to be able to make money from tarde financing and investment flows.
The US would have to sanction many companies and individuals to prevent this, as since CHina is the worlds 2nd largest economy, that would mean a severe global recession if they were to extend sanctions.
The impact is not just China.. there is poterntial global fallouot depending ont he steps the US takes.