Mon, Mar 05, 2018 - Page 6 News List

EDITORIAL: Reacting to looming US tariffs

US President Donald Trump’s announcement on Thursday last week about imposing hefty tariffs on foreign steel and aluminum has raised anxiety over the outlook for the markets and the global economy. While the full impact of the trade move remains to be determined and Trump has yet to give his final approval for the penalties — although that could happen as early as this week — the US’ unilateral decision to impose import tariffs is nearly certain to prompt its trading partners to file a trade dispute with the WTO and the world economy to undergo waves of retaliatory measures.

In January, Washington decided to slap steep tariffs on imports of washing machines and solar energy cells and panels. A likely scenario is that the Trump administration will continue to erect the kind of trade barriers it considers necessary to protect US manufacturers.

Ironically, even though the White House has long accused China of unfair trade practices, Trump’s latest tariff proposal might not directly hit China as hard as expected. US government data indicate that Canada is by far the largest steel exporter to the US, followed by Brazil, South Korea, Mexico and Russia — Turkey, Japan, Taiwan, Germany and India place No. 6 to No. 10, with China only coming in at No. 11.

In other words, a blanket tariff on steel imports would harm Washington’s closest allies and trade partners the most, not China. Moreover, the tariffs could have negative consequences on the US economy itself, such as higher prices on a variety of items for US consumers.

Meanwhile, previous trade sanctions by former US presidents — ranging from voluntary import restraints under Ronald Reagan, quotas under Jimmy Carter to steel tariffs under George W. Bush — have failed to stop a steady decline in US steel jobs over the years.

Trade is a major contributor to world economic growth and a global trade war would have no winners, as all nations — including the US — depend on a free flow of goods and services to drive their economies.

Being small and open, Taiwan’s export-reliant economy is particularly susceptible to external demand volatility and therefore cannot afford to get trampled in a potential trade war on the global stage.

The Ministry of Economic Affairs on Friday said it would wait for details on the new US tariffs before assessing their potential impact on Taiwanese exporters, but no one can ignore the looming threat.

According to the Bureau of Foreign Trade’s statistics, Taiwan’s steel exports to the US under trade remedy investigation totaled US$1.26 billion last year, accounting for 4.35 percent of total US imports, while Taiwan’s aluminum exports to the US totaled US$57.12 million, or 0.33 percent of overall US imports. Overall, the proposed tariffs are likely to affect about US$1.32 billion worth of Taiwanese goods shipped to the US annually.

There is no doubt that trade restrictions affect the global economy and cause a “lose-lose” situation for all trade participants, but another repercussion of the proposed US tariffs is that there might be increased market competition outside the US, as all major metal makers react to US import duties by rerouting products from the US to other markets such as Europe and Southeast Asia.

Against this backdrop, Taiwanese manufacturers have reason to be anxious and should speed up diversifying their overseas markets to minimize the potential impact, or go straight to setting up production facilities in the US to avoid paying tariffs.

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