US President Donald Trump’s tariff policy serves as an objective and as a tool for him. Its objectives are twofold: first, to ease the US’ debt burden through tariff revenue; second, to provide a tax base for the “One, Big, Beautiful Bill” tax cuts.
The execution lies in pressuring other countries to negotiate with the US and make concessions in exchange for tariff reductions. Yet Trump’s tariff policy cannot solve the US’ deeper challenges — widening income inequality, blue-collar workers forced into low-paying jobs after losing manufacturing positions, inflationary pressure and the inability to sustain a long-term confrontation against China.
The US faces several economic problems.
First, its deindustrialization has worsened inequality. Displaced blue-collar workers are unable to shift into other manufacturing jobs and instead, they are forced into low-wage service work. Imposing high tariffs on China without viable substitutes only fuels inflation and undermines the sustainability of these policies.
Second, excessively high education and healthcare costs raise living expenses and reduce living standards, leaving lower and middle-class families unable to advance through education and decreasing social mobility.
Third, the proliferation of drugs and firearms severely threatens public safety. Frequent homicides reduce the labor force and impose heavy social costs.
The most critical issue is deindustrialization — manufacturing accounts for only 10 percent of US GDP. This creates several problems.
First, income inequality continues to widen. High-wage jobs are limited to doctors, lawyers, accountants and specific service sectors such as information technology, telecommunications and logistics while most other service jobs remain low-wage.
Second, workers from the withering manufacturing industry cannot transition into related fields and are forced into low-paying service jobs, with little sense of satisfaction in their work. Manufacturing provides stronger industrial linkages and more job ladders, offering opportunities for advancement.
Third, with a gutted industrial base, there’s a lack of substitutes for Chinese goods. The US must still import from China and Southeast Asia, pushing up prices, worsening inflation and making tariff policy unsustainable — preventing the US from engaging in a long economic contest with China.
Trump’s call for reindustrialization could help narrow income inequality and ease the plight of blue-collar workers. However, Trump has ideas without effective strategies. Beyond pressuring semiconductor and automobile giants to invest in the US, he lacks substitutes for everyday consumer industries, which still depend heavily on imports from China.
Taiwan’s experience in helping China create 60 million to 80 million jobs could be replicated in the US. If Washington sets clear performance indicators such as the level of Taiwanese investment, number of jobs created, skilled workers trained and technical schools established, Taiwan could in return secure lower reciprocal tariffs, special economic zones (with looser restrictions on foreign labor, reduced union constraints and land or tax incentives), while introducing artificial intelligence, automation and robotics to cut costs. This would allow traditional industries to take root in the US, reduce import dependence, curb inflation and create more jobs.
At the same time, Taiwan could access parts of the US market and mitigate the impact of reciprocal tariffs on its domestic industries — a win-win strategy.
In the medical service area, Taiwan offers relatively affordable services. If bilateral agreements are established, some US patients with severe illnesses could seek treatment in Taiwan under international medical programs, significantly reducing medical costs for patients and the US healthcare system.
In education, establishing technical schools or programs and clear promotion channels could expand employment opportunities, reduce income inequality and even lower crime rates.
On drugs and guns, effective zoning laws could be introduced. For example, within particular zones, all firearms and drugs would be strictly banned. People who are caught with these items in those areas, would face heavier penalties. Such measures could curb the spread of drugs and guns. If these programs succeed, they could be expanded nationwide.
The US’ challenges — reindustrialization, high medical costs and expensive education — are deeply entrenched. Taiwan could help alleviate some of these problems by creating more manufacturing jobs, supporting blue-collar transitions, narrowing income inequality and building vocational institutions that lower education costs while providing immediate employment opportunities after graduation. With effective medical agreements, Taiwan could help reduce US medical costs, especially for low and middle-income families. Of course, such cooperation must be subject to volume controls to prevent resistance from US medical associations.
A broader Taiwan-US cooperation and strategic alliance could help mend the US’ deeper structural economic issues. This is a path worth considering by both governments as they seek a closer partnership.
Wang Jiann-chyuan is vice president of the Chung-Hua Institution for Economic Research.
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