The export landscape for Taiwan is expected to change drastically after US President Donald Trump’s “reciprocal” tariffs take effect tomorrow. That is because Trump is to impose higher-than-expected levies on Taiwan and China, and hefty tariffs on countries under local firms’ “China Plus One” investment strategy — especially ASEAN members. That would include countries such as Cambodia, Indonesia, Myanmar, Thailand and Vietnam, making it difficult for Taiwanese businesses to continue sourcing intermediate goods from those nations, assembling them into final products and shipping them to the US.
Taiwanese exporters expected ASEAN members to become the new pathway to the US market, following the tariffs Trump imposed during his first term, which were primarily targeted at imports from China. As a result, Taiwanese businesses — from electronics and textiles to footwear, furnishing and auto parts — avoided an overconcentration on China, diversifying their supply chain risks and reducing production costs. However, as the new tariffs are more significant and broader than projected, such expectations have quickly diminished.
Taiwan’s exports last year rose 9.9 percent year-on-year to US$475.07 billion, the second-highest ever, with shipments to the US reaching a record US$111.4 billion and those to ASEAN members hitting a record US$87.8 billion, Ministry of Finance data showed. While China and Hong Kong remained the leading destination for Taiwan’s exports and accounted for 31.7 percent of the nation’s total outbound shipments last year, their share fell to the lowest level in 23 years. In contrast, exports to the US comprised 23.4 percent of the total last year, the second-highest destination, and those to ASEAN members accounted for 18.5 percent, the third-highest.
The calculation for the tariffs is questionable and unimaginable. It was based on the levies required to balance US trade deficits, rather than reflecting their tariff rate differentials, value-added taxes, currency exchange rates or other non-tariff trade barriers, as initially anticipated. It is Trump’s tactic to force countries to negotiate with the US on ways to reduce trade deficits and direct more manufacturing to the country.
The brutal reality is that the US is imposing massive tariffs on countries that Chinese companies use as bases to rebadge products to evade US tariffs. No matter where firms set up factories abroad, there is nowhere to hide from US levies. If the tariffs remain unchanged following trade negotiations with Washington, it would inevitably have a direct effect on Taiwan’s exports to the US and an indirect impact on shipments to Southeast Asian countries, which would require Taipei to adjust its foreign trade strategies and companies to rethink overseas production.
Broadly speaking, Trump’s tariffs would likely spike US inflation and hamper the country’s economic growth. It would also have negative implications for Asian economies’ growth this year and beyond. However, Taiwan is particularly vulnerable, given its high exposure to the US market and the high 32 percent tariff, as well as the rise in local firms’ investments in emerging nations in Southeast Asia and overall exports contributing 60 percent or more to Taiwan’s GDP.
As government agencies assess the tariff’s effects on domestic industries and prepare relief programs for affected businesses, Taipei must seek to negotiate with Washington to bring down the duties or limit their scope, although it might take some time and require a complex process to achieve any acceptable outcomes. In the meantime, policymakers should consider expanding purchases of US energy, agricultural products and aircraft, adjusting Taiwan’s import tariff structure and removing non-tariff barriers to address the “unbalanced” Taiwan-US trade. Over the long term, Taiwan must accelerate its industrial upgrades and market diversification.
The White House’s decision to take a 9.9 percent stake in Intel Corp is looking like very shrewd business indeed. Since the government bought in at US$20.47 a share last August, the US chipmaker’s surging stock price has delivered the US a US$43 billion return. One of the reasons the investment has so far proved so sound is that the White House has made sure of it. According to The Wall Street Journal, Howard personally pushed deals on Intel’s behalf with some of the most lucrative clients imaginable. They include Nvidia Corp, the company at the heart of the AI
KMT Chairwoman Cheng Li-wun’s (鄭麗文) recent visit to Beijing and her upcoming visit to Washington will serve as a high-level test of her diplomatic mettle. In Beijing, Cheng was received with symbolic gestures, a warm reception, and high-level access. In Washington, she will receive far less pomp and far sharper questions about the KMT’s vision for the future of Taiwan. Her challenge will be to persuade Washington that the KMT’s engagement with China can coexist with strong deterrence. Cheng’s April 7-12 visit to mainland China coincided with an intense period of conflict in Iran. Despite the strategic significance of Cheng’s trip,
The closure of the Strait of Hormuz has sent the vast Asian chemicals industry into a tailspin. Deprived of the likes of Qatari natural gas and Saudi Arabian oil, the region’s fertilizer and plastics plants are slowing production or even shutting down. Everywhere except China, that is. In petrochemicals, China is unique. As well as a traditional industry that uses oil and gas as feedstock, it has parallel output that relies on its abundant domestic coal. Unsurprisingly, India and other regional powers want to copy and paste the Chinese method. This would not be easy — or climate friendly. The
Indonesian President Prabowo Subianto says he knows how to fix the problems facing Indonesia. Yet his economic mismanagement and authoritarian tendencies are steering the nation toward a familiar mix of currency instability and political chaos. The world’s fourth-most populous nation risks reversing the hard-won democratic and business reforms that came after the Asian Financial Crisis in 1997. At that time, the rupiah collapsed and the political upheaval that followed forced former president Haji Mohamed Suharto from power. Prabowo’s administration is ignoring similar warning signs. That disconnect was apparent in a national address on Wednesday, when Prabowo projected the swagger that has
RSS