US President Donald Trump on Thursday last week signed the “Further Modifying the Reciprocal Tariff Rates” executive order reiterating the president’s claims of tariff power under the International Emergency Economic Power Act and the Trade Act of 1974.
The order suggests the Trump administration is seeking to clamp down on China, which has evaded high tariffs by shipping their products to the US through other countries. Washington is also seeking to consolidate an economic and national security alliance, as well as reshape geopolitics and international trade.
The declaration is closely in line with Executive Order No. 14257, issued on April 2. Viewing trade deficits as an unusual and extraordinary threat to US national security and its economy, Trump declared a national emergency to give himself tariff power.
The amendments to the tariff rates draw a clear boundary: Those aligning with the US would enjoy economic benefits and be given room for negotiations, while those that do not would be punished with high tariffs.
Two major points stand out in the new order: First, trading partners must align with the US on economic and national security matters; second, it strives to curb transshipments by China. Chinese products coming to the US through other countries would be subject to an additional 40 percent tariff rate.
Both points target China. They also reflect Washington’s intentions to retaliate against the BRICS’ (Brazil, Russia, India, China and South Africa) efforts to upend the “status quo.” If BRICS members fail to adhere to the US international order, the White House would slap high tariffs on them and seek to isolate them on the global stage.
The White House has categorized countries in its tariff rates by how friendly they are to the US. Syria, Laos and Myanmar have been hit with a 40 percent tariff rate; they are clearly sanctioned. The US imposed a 20 percent levy on Taiwan, Vietnam and Bangladesh, as it is observing and pressing them. Although Japan, South Korea and the EU have only been hit with a 15 percent rate, they are nevertheless included in the Trump administration’s attempt to rebuild the US’ tariff framework.
On the other hand, Canada and Mexico are treated differently due to efforts to crack down on drug trafficking and other collaborations with the US, which signals that Trump is leveraging certain issues to negotiate for cooperation in many fields, not just trade agreements.
For Trump, tariffs are no longer just economic tools, but part of a strategic global framework to force trading partners to choose sides. Such thinking contradicts the free-trade system, but is more in line with the combative nature of modern geopolitics and sensibilities.
Trump’s tariffs also seek to disrupt China’s “origin washing.” China has circumvented attempts to limit its exports by shipping to a third country to perform light assembly before being relabeling them and selling them to the US.
The Trump administration considers transshipment a national security loophole. Every six months, the US is to publish a list of countries and companies participating in transshipments, to force companies to carefully consider the national security risks of such schemes.
Taiwan is in a peculiar position. It is a key partner of the US on tariff and tech policies. Taiwan Semiconductor Manufacturing Co’s establishment of plants in the US is symbolic of the nations’ deeply integrated supply chains. On the other hand, Taiwan must protect its economy and industrial independence. Taiwan’s view of mutually beneficial relations should be included in ongoing talks with the US.
Much attention is focused on whether semiconductors are integral to US national security. The outcome of discussions between Taipei and Washington would impact how the countries cooperate on chips, supply chains and tech security.
Trump’s executive order is more than an economic policy; it is a plan to restructure global supply chains and rebalance geopolitics. It seeks to ensure that countries align with US economic and national security interests, especially their resolve to curb Chinese transshipments.
The clash between Washington and Beijing would continue, putting pressure on other countries to take sides. Understanding the strategic essence of the policy, as well as future trends, is critical to Taiwan’s response.
Liao Ming-hui is an assistant researcher at the Chung-Hua Institution for Economic Research.
Translated by Cayce Pan
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