With only days left before US president-elect Donald Trump takes office, several companies have announced multibillion-dollar investments in the US, including Fiat Chrysler Automobiles NV, Ford Motor Co, Toyota Motor Corp, Lockheed Martin Corp, Softbank Group Corp and Alibaba Group Holding Ltd.
Trump’s focus on creating jobs in the US, and the uncertainty over what policies his administration might introduce, have also dominated discussions among prominent Taiwanese businesspeople, with Hon Hai Precision Industry Co confirming that it is considering a new investment in the US and Formosa Plastics Group announcing that it is expanding its production facilities in Texas.
Last week, Taiwan Semiconductor Manufacturing Co (TSMC) said it had not ruled out building a plant in the US.
Whether Trump’s proposed tax policy and other measures will make the US one of the best investment destinations in the world is an open question.
However, the possibility of increasing protectionism due to Trump’s presidency poses short-term risks for Asian economies, especially for Taiwan.
Recent economic data, including export orders, industrial production and the manufacturing purchasing managers’ index, had economists and industrial conglomerates forecasting that the economy would soon see the light at the end of the tunnel.
Specifically, last month’s trade data — which saw the nation’s exports maintain double-digit growth for the second consecutive month while import growth bounced back — might be the confirmation that a recovery is well under way, thanks to steady growth in the US, a stabilizing economy in China, an upturn in the global electronics sector and rebounding commodity prices.
That has been reflected in the New Taiwan dollar, which ended last year with a 2.44 percent annual gain to become the third-best-performing Asian currency.
Economists say the NT dollar is likely to stay resilient this year, supported by the nation’s solid trade surplus and a gradual recovery in GDP growth, despite the potential pressure of capital outflows triggered by faster-than-expected interest rate hikes by the US Federal Reserve.
However, the state of the external sector continues to be the biggest downside risk to Taiwan’s economic growth, at least in the near term, with protectionism in global trade and China’s economic rebalancing being potential concerns.
As a result, it is too early anticipate a robust economic recovery, given the nation’s high sensitivity to the situation in the US and China, as well as political risks in Europe. Any extreme policy moves from either the US or China, or any political or economic developments that threaten stability in Europe, would have negative implications for Taiwan.
Meanwhile, the recent implementation of new labor regulations — which stipulate a five-day workweek with “one fixed day off and one flexible rest day,” to achieve a 40-hour workweek along with new calculations for overtime pay — is the reason why some people are not too optimistic about the economy. Several business representatives have said that the new rules will lead to a “lose-lose” situation for employers, employees and consumers, while companies such as TSMC and Largan Precision Co have suggested raising the cap on overtime work from 46 hours per month to 54 hours per month to help solve problems in establishing rotating shifts for employees.
Compared with Taiwan, the US has a more welcoming and predictable investment environment, some Formosa Plastics officials have said.
That is another problem facing the nation. Policymakers must find a way to keep businesses from redirecting their money abroad. Apart from consumption and trade, business investment is a key driver of economic growth.
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