The central bank yesterday suggested that the government approach Taiwan’s trade surplus with the US carefully, as the administration of US President Donald Trump plans to introduce reciprocal tariffs to address its trade imbalances with other nations.
Central bank Deputy Governor Chu Mei-lie (朱美麗) is to give a special report to the legislature’s Finance Committee today on potential US tariff hikes and Taiwan’s inclusion on the “Dirty 15” list of trade surplus nations.
Last year, the US recorded a US$73.9 billion trade deficit with Taiwan, making it the sixth-largest trade surplus source after China, Mexico, Vietnam, Ireland and Germany, the central bank said.
Photo: George Tsorng, Taipei Times
The central bank attributed the trade surpluses to intensifying US-China trade disputes and technology competition, the strengthening of cybersecurity and an ongoing artificial intelligence (AI) boom that together have boosted US demand for chips and information communications technology products.
“The vast amount of trade surplus raises concerns over trade frictions with the US,” the bank said.
By measure of simple average calculations, Taiwan’s tariffs are 3.2 percentage points higher than the US, although the gap is lower than that of India, South Korea, Thailand, Vietnam, China and Indonesia, the central bank said, citing WTO data.
However, Taiwan has lower tariffs than the US if judging by trade-weighted average tariffs, providing room for negotiation, it said.
Taiwan imposes relatively high tariffs on US agricultural products than non-agricultural products. It shipped US$890 million of agricultural products to the US last year, while importing US$3.69 billion, resulting in a trade deficit of US$2.8 billion in this sector, the central bank said.
That discrepancy could serve as negotiation leverage on the part of Taiwan during trade discussions, it suggested.
Canada and Mexico would take a hard hit from US tariffs, while Taiwan would see moderate repercussions, according to a study by Standard & Poor’s Global Ratings, after Trump threatened to impose a 25 percent tariff on its neighbors and an extra 10 percent tariff on other trade partners, the central bank said.
The US tariffs, if realized, would slow the world economy this year, the study added.
The US Department of the Treasury has sought to protect US interests and business sectors by releasing a semi-annual currency report in April and October to assess whether major trade partners manipulate their currencies to advance unfair trade practices, the central bank said.
Countries meeting two out of three criteria — a significant trade surplus, a large current account surplus and exchange rate interventions — are placed on the currency watch list, it said.
Taiwan has been on the watch list, but the central bank emphasized Taiwan’s foreign exchange interventions are intended to maintain currency stability rather than gain trade advantages, it said.
Countries that meet all three criteria are subject to economic sanctions.
The central bank said it keeps free and effective communication with the US, adding that the two sides would continue economic and currency policy exchanges based on mutual understanding.
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