Taiwan should keep a close eye on the possible repercussions to it from the deteriorating US-China relationship, former American Institute in Taiwan (AIT) chairman Richard Bush said on Friday in an article posted on the Brookings Institution’s Web site.
Now the director of the think tank’s Center for Northeast Asian Policy Studies, Bush said that while US Vice President Mike Pence’s recent rhetoric on China was harsh, “Taiwan might become a victim of ‘friendly fire’ in a US-China trade war,” due to its close economic ties with China.
In an Oct. 4 speech to the conservative Hudson Institute, Pence condemned Beijing for threatening cross-strait stability and accused it of resorting to economic aggression to extend its global reach.
Some observers in Taiwan and elsewhere in Asia might conclude from Pence’s speech that US-China relations would become zero-sum, Bush wrote in “What Taiwan can take from Mike Pence’s speech on China.”
“China would have a lot to lose from all-out competition with America, but US allies and partners in the region also might be at risk from both the current trade war and from wider Washington-Beijing rivalry,” Bush wrote. “Taiwan’s situation is particularly complex.”
Since the early 1990s, Taiwanese firms have been exporting goods to China, and as a result, Taiwan has become a critical link in supply and value chains that run from the US, he wrote.
“But for purposes of US customs, the finished products are treated as Chinese goods, so a US decision to increase tariffs on those goods would hurt the Taiwan companies and perhaps wipe out the narrow profit margins on which they operate,” he wrote.
The US last month announced a 10 percent tariff against US$250 billion worth of China goods, which would increase to 25 percent by the end of this year, after a 25 percent tariff was imposed on US$60 billion worth of Chinese merchandise earlier this year.
Some in Taiwan are likely to believe that deteriorating US-China relations would provide it with a chance to seek benefits that Washington was previously unwilling to grant, Bush wrote.
However, the nuclear threats posed by Iran and North Korea are still top issues, he wrote.
“If previous [US] administrations chose not to extend those benefits because it badly needed Beijing’s cooperation on issues like North Korea, Iran and climate change, the reduction or disappearance of cooperation would obviate the need for American restraint on Taiwan,” Bush wrote.
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