At the beginning of last month, US President Donald Trump tweeted that he was going to delay further increasing tariffs on Chinese goods. The planned increase was part of the US government’s efforts to significantly change the way that China conducts its economic affairs, tackle intellectual property issues and some of the policies it considers unfair toward US companies doing business in the Asian country.
In Trump’s tweet, he wrote that because there were “productive talks, I will be delaying the US increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi [Jinping, (習近平)] and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for US & China!”
While this was without a doubt good news for global markets, which have been rattled by the tension between the two countries, the fact that there was not a signed agreement cannot be ignored. For now, no one knows for sure what the ultimate result will be.
At the beginning of the conflict, the future looked very dark for Taiwanese companies, especially considering how intertwined Taiwanese and Chinese production lines were.
However, after months of conflict with no resolution in sight, it is worth asking: Can Taiwanese companies benefit from the trade dispute between China and the US?
The simple answer is yes, and it seems that there are many Taiwanese companies that have either already benefited or are in the process of moving their manufacturing lines to seize new opportunities.
Among the companies that have already moved their production lines from China is Eclat Textile, an apparel supplier to companies such as Adidas, Nike and Under Armour. Eclat Textile left China for Cambodia and Vietnam a few years ago and was one of the first companies to benefit from the trade spat.
The Nikkei Asian Review in September last year reported that key iPhone assembler Pegatron has discussed plans to move from China to avoid tariffs on networking devices.
Some Taiwanese electronics manufacturers, such as New Kinpo Group and Delta Electronics, have also reportedly announced plans to move their factories to other countries in Southeast Asia.
Reuters has reported that Apple plans this year to begin assembling top-end iPhones at Hon Hai Precision Industry’s unit in India. This is in addition to the smartphones they already make in that country for Xiaomi, and is an attempt at mitigating the effects of the trade spat.
It is not only countries such as Vietnam, Cambodia and India that Taiwanese companies are looking to, Taiwan has also emerged as a good option.
President Tsai Ing-wen’s (蔡英文) administration is well aware of this and is trying to capitalize on it. The government last year launched a three-year program offering benefits to companies moving their operations back home, such as tax credits, discounts on utility fees and assistance with finding land and recruitment.
All of these incentives have one goal: to tackle the criticism that her government has received for not doing enough for the Taiwanese economy and increase the number of jobs in the nation. If successful, this will help her re-election campaign.
In November last year, Bloomberg published an article that said there were signs that the trade dispute was having a positive effect on Taiwan, describing a jump in industrial production that was a direct result of companies moving their production lines back home.
The report said industrial output jumped 8.25 percent in October, reaching its highest level since 1996, and that the manufacturing sector was the biggest contributor to that gain, with a 9.24 increase.
It was also reported that Giant, one of the largest bicycle makers in the world, announced plans to offer 300 to 400 jobs in Taichung and said that it would look for land to build a logistics center nearby.
At the beginning of this year, there were also reports that Quanta Computer — a Taiwanese firm that focuses on the US market and produces about 3 million servers per year — has moved production of what is known as “Level 6 servers” back home.
These are motherboards that are later shipped to facilities in Mexico and the US to be installed on server racks, which fall under the third round of US tariffs.
Quanta has reportedly moved about one-seventh of its total production capability, but has not ruled out moving more to Taiwan.
Besides Quanta, another important server manufacturer, Inventec, has quietly transferred many orders back to its Taoyuan plant.
Taiwan News reported that the Ministry of Economic Affairs said as many as 60 Taiwanese companies were looking to expand their business in Taiwan to protect their operations from the trade dispute.
The report said that the list included bicycle and electronics companies that had publicly announced their intentions to expand within Taiwan.
Tax Administration Deputy Director-General Sung Hsiu-ling (宋秀玲) said that Taiwan is doing its best to help companies mitigate the effects of the ongoing conflict, but added that companies could also help themselves by “understanding, planning and grasping opportunities stemming from the trade war.”
After all, a deal might be reached between the two superpowers, but there are no guarantees that things will return to business as usual. Competition between China and the US is unlikely to disappear soon, and companies all over the world have begun to realize the benefits of having a diversified supply chain.
Is a different world now: The low wages that once made China so attractive have significantly increased and the relationship that China had with the US has deteriorated dramatically, to the point that the US Department of Justice has charged Chinese business executives with contravening intellectual property laws.
That, combined with a climate of distrust and the unpredictability of Trump, makes spreading manufacturing capabilities a safe bet for companies looking to protect their business.
Many Taiwanese companies have already reaped the benefits of the conflict that many thought would only bring bad news for the economy. The firms that have not yet done so should, because the dispute will change the world’s trade dynamics for years to come.
Juan Fernando Herrera Ramos is a Honduran lawyer residing in Taiwan.
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