In response to US President Donald Trump’s tariffs, the Chinese Nationalist Party (KMT) caucus on Tuesday proposed a bill that includes a provision to distribute cash handouts of NT$10,000 to each Taiwanese national before the end of October. However, at this stage, this is not an appropriate solution. The impact of the US’ tariffs cannot be resolved with a simple cash handout, and the recent appreciation of the New Taiwan dollar makes such a measure even less reasonable.
The US tariff hikes against Taiwan have significantly raised costs for exporters. However, if a product is competitive enough, those costs could be passed on to US consumers — in cases such as these, the real impact on exporters stems from reduced demand caused by a decrease in US consumer purchasing power.
If a product is replaceable, the short-term impact would be severe and the government should swiftly intervene by leading firms to explore other export markets or undergo transformations. The government’s role is not to provide universal subsidies to all firms, but to support and guide those that are most affected.
The appreciation of the New Taiwan dollar is the most basic economic principle in addressing the Taiwan-US trade imbalance. As various sectors anticipate appreciation, hot money flows in, possibly from overseas or Taiwanese investors. When appreciation occurs, import costs decrease and importers immediately benefit, making subsidies unnecessary. Taiwanese consumers would also enjoy falling prices, slowed inflation and a decrease in the cost of overseas travel — all benefits which would boost consumer spending. Issuing cash handouts would then serve no clear purpose — that is, other than to attempt to avoid the political fallout of a recall.
Trump’s tariffs could lead to a global economic recession, a risk that requires advanced preparation — but not in the form of immediate universal cash handouts. The NT dollar has already appreciated. If combined with nationwide cash handouts and excessive spending, this could result in an influx of hot money. Taiwan would risk experiencing an asset bubble, similar to Japan’s in the late 1980s, which severely damaged its economy.
The most pressing task is to prevent the NT dollar’s appreciation from causing excess consumer spending due to hot money inflows. It is also urgent to prevent a surge in the money supply brought on by the money multiplier effect.
It is worth noting that despite holding a majority in the previous legislature, the Democratic Progressive Party (DPP) never used its numbers to force through votes or crush all dissent. Most bills were passed after holding cross-party discussions and coming to the broadest possible consensus.
However, this legislative session is in stark contrast, having been completely dominated by the alliance between the KMT and the Taiwan People’s Party (TPP). Together, they hold just one more legislative seat than the DPP caucus, yet the sheer level of their arrogance suggests that they think they are a majority party. Rather than seeking a consensus before passing bills, they often resort to forced voting, intensifying partisan conflict, and worsening the quality of legislation and budget proposals.
If the KMT forces the vote again to pass this bill, distributing NT$10,000 in cash to all Taiwanese would not benefit the nation’s economic development. Universal cash handouts must be timed appropriately. If the global economy were stagnating, such a measure would be much-needed relief. However, if there are already concerns over inflows of hot money, handing out cash could instead fuel a bubble economy.
This would be anything but a blessing for the country, and would sow the seeds of future accountability. Surely, the blue and white parties would not once again shirk their responsibility when the time comes.
Wang Chih-chien is a distinguished professor at National Taipei University’s Graduate Institute of Information Management.
Translated by Kyra Gustavsen
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