Earlier this month, the Ministry of Economic Affairs said the government would help Taiwanese firms relocate their China-based production plants if US president-elect Donald Trump carries out his campaign pledge to impose a 60 percent tariff on Chinese-made goods. It did not provide further details on how it would help, but Taiwanese firms in China again have to face the choice of whether to remain in the ever-challenging environment across the Strait or hasten their efforts to move out of China.
During his first term from 2017 to 2021, Trump imposed 25 percent duties on US$250 billion of Chinese imports in his first three rounds of tariff hikes, targeting products such as chemicals, automobiles, aircraft, ships and flat-panel displays. In the fourth wave of tariff increases, Trump imposed 15 percent duties on US$120 billion of Chinese goods, covering footwear, textiles, food, dishwashers and flat-screen TVs, but the duties were later halved to 7.5 percent following concessions from Beijing.
US President Joe Biden’s administration has generally continued Trump’s tariff policy. In May, Washington imposed 100 percent duties on Chinese electric vehicles, in addition to various duties on imports of Chinese solar and lithium batteries, a move that can be viewed as a fifth wave of tariff hikes on Chinese goods.
China has always been the largest overseas investment destination for Taiwanese businesses. Since Taiwan started allowing firms to invest across the Taiwan Strait in 1991 during China’s economic opening, it had approved 45,797 China-bound investments totaling US$209.7 billion as of the end of September. The manufacturing sector took the lion’s share of China-bound investments, with 35,245 investments totaling US$157 billion, ministry data showed. These Taiwanese firms are at the forefront of the US-China trade dispute, as Trump again turns to aggressive tariffs. They need to make a decision on whether to move now.
Meanwhile, the COVID-19 pandemic and a series of geopolitical conflicts have prompted many US and European businesses in the past few years to expand imports from nearby and like-minded countries, underscoring a trend of manufacturing near-shoring and “friend-shoring.” As a democratic country, Taiwan benefits from this trend, with Taiwanese products increasingly favored over Chinese goods in Western markets. In the meantime, Taiwanese firms are also expanding their footprints in India, ASEAN members and Latin America, using these countries as bases to prepare for a future beset by US-China tensions.
However, Trump’s dislike of manufacturing off-shoring or “friend-shoring,” and his idea of imposing an additional 10 to 20 percent duty on all goods imported into the US are likely to accelerate the reorganization of global supply chains again, which also warrants Taiwanese firms’ close attention.
From 2019 to 2021, as a trade dispute raged between Beijing and Washington, Taiwan initiated a domestic investment plan to incentivize overseas Taiwanese firms to return home, assisting with taxes, financing, land acquisition, utilities and labor. The government extended the plan by another three years in 2022 in light of persistent demand from overseas Taiwanese companies and the ongoing transformation in the global economy and supply chains. The plan has not only attracted 254 re-shoring enterprises to invest in Taiwan, but also spurred additional investments from supply-chain businesses.
It is unclear whether the government would extend the policy or provide other measures to assist overseas Taiwanese firms after Trump returns to the White House in January. One thing is certain: The US policy trend toward reducing its trade reliance on China would persist in the years to come. Confronting China has become a rare point of consensus between the US’ Democratic and Republican parties. These issues would inevitably affect Taiwanese firms here and abroad.
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