Tariff developments continued to dominate headlines last week, with the US and China imposing fresh tit-for-tat tariffs, further escalating trade tensions between the world’s two largest economies. However, global markets also received a major reprieve after US President Donald Trump on Wednesday announced a 90-day pause on most “reciprocal” tariffs, except for those against China.
From an economic perspective, Trump’s tariff pause has done little to improve the global outlook, as it only applies to countries that have pledged not to retaliate against higher US levies. The baseline 10 percent tariff is still in place for all countries, which US National Economic Council Director Kevin Hassett in an interview with CNBC said would be a permanent measure.
Moreover, average US tariffs have risen markedly since Trump took office on Jan. 20, driven by a range of additional duties on cars, steel and aluminum. In particular, the US levies on Chinese imports have shot up from 20 percent to 145 percent, with the escalating confrontation between the two sides casting a potentially long and dark shadow over the global economic outlook.
However, Trump’s 90-day tariff pause offers countries additional time to negotiate trade deals. Taiwan held its first tariff talks with the US on Friday and plans to hold further discussions soon.
In addition, the tariff reprieve provides companies with a critical window of opportunity to speed up shipments and look for other trade options. It also helps to ease concerns about supply chain liquidity and mitigates the risk of an immediate economic slowdown.
While the tariff pause helps improve market sentiment a bit, one should not celebrate too early, as concerns have been raised that the high tariffs on China would divert Chinese goods into other nations or transit through low-tariff, third-party countries before entering US shores. The latter has especially raised attention in Taiwan, Vietnam, Mexico and several other countries about China’s tariff evasion and dubious transshipment tactics, as governments strive to engage with the US to reach tariff deals. Considering Trump’s higher-than-expected reciprocal tariffs on Cambodia, Vietnam, Myanmar, Thailand and Indonesia, the US government seems to prioritize closing loopholes that previously enabled transhippments via those Southeast Asian countries to conceal the origin of Chinese goods and evade tariffs.
To earn the trust of its trading partners amid the ongoing restructuring of global trade, Taiwan should enhance efforts to prevent China’s low-priced goods being rerouted through its territory and falsely labeled as “Made in Taiwan.”
Therefore, the Customs Administration should rigorously verify the origin of goods suspected to be imported from China and destined for the US, to prevent mislabeling and illegal transshipment schemes.
The authorities also need to impose stricter penalties for origin fraud and product mislabeling, as these issues are central to Taiwan-US tariff negotiations and could influence Washington’s assessment of Taipei’s credibility.
Furthermore, the government must pay attention to a proposed amendment to Article 18-1 of the Offshore Islands Development Act (離島建設條例) put forward by Chinese Nationalist Party (KMT) legislators. The amendment seeks to establish an “offshore free-trade demonstration zone” in Kinmen and Lienchiang counties — an initiative that would not only grant Chinese citizens, companies, goods and investments free-trade access, but also create a “backdoor” for the transshipment of Chinese goods, disguising the country of origin and minimizing tariff payments.
The danger of such legislation lies in its potential to undermine Taiwan’s national security and sabotage its trade relationship with the US.
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