Like other emerging economies in Asia, Taiwan saw great fluctuations in its financial markets in the three days following US president-elect Donald Trump’s surprise victory on Wednesday last week. Fortunately, Trump did not make inflammatory comments in his victory speech.
However, stunned by the election result, investors are still trying to glean information about what policies Trump plans to pursue after taking office on Jan. 20 and how that would affect their portfolios.
Experience indicates that “president Trump” might not actually follow the path laid out by “candidate Trump,” because he might face challenges winning the backing of US Congress for his policies, therefore investors do not need to worry too much about aggressive measures from the US president-elect.
However, Asia is likely to experience an initial shock in terms of investment and trade over the next few months, because of confusion and uncertainty about US policies, and delays in capital expenditures, while the real blow to the region’s economies might come next year amid higher US interest rates and a more hostile trade policy under Trump’s presidency.
Indeed, Trump’s victory symbolizes the end of the free-trade era of the past 40 years. Although he did not spend a lot of time talking about the details of his trade and economic policies throughout his campaign, his baseline hostility to free trade and repeated calls for higher tariffs on goods imported to the US have stoked fears of a more protectionist trade environment, posing risks for Asian economies, and China in particular, with regard to currency manipulation, loss of US jobs and the theft of intellectual property.
Many Taiwanese manufacturers that have built production bases in China to export goods to the US face greater uncertainty and they need to give serious consideration to the extent to which they could move their manufacturing facilities to the US to ward off trade disputes. They must also prepare for more punitive measures from the US in case anti-dumping, anti-subsidy and other trade investigations become more frequent under Trump’s presidency.
Another challenge facing Taiwan is Trump’s obvious distaste for the Trans-Pacific Partnership (TPP) deal. Trump never shied away from attacking free trade and globalization during his campaign, even threatening to void the TPP agreement after taking office. As a result, the White House’s acknowledgment on Friday that it is stopping the attempt to seek congressional approval for the TPP during President Barack Obama’s final months in office is not only a defeat for the Obama administration, but also a great disappointment for Taiwan, which has been trying to join the US-led TPP to help improve the nation’s overall position in regional economic integration, while decreasing its economic overdependence on China.
Despite the unpromising prospects for the TPP, Taiwan needs to move on and to continue seeking a broad-based advance in the major components of its economy, as the nation has reached a point where there is no time to waste to improve its economic structure and upgrade its industrial sector, with or without the trans-Pacific deal.
The world is not going to end for Taiwan if Trump seeks a US withdrawal from the TPP, but Taiwan needs to boost its trade ties with the US through the ongoing Trade and Investment Framework Agreement talks and has to consider that regionalism could be the dominant theme in Asia in the long term.
In view of the growth in intra-regional trade in Asia over the past few years, the administration of President Tsai Ing-wen (蔡英文) should present clearer and bolder measures on its “new southbound policy.” Most importantly, concrete steps are needed, not just discussions about policy.
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