Taiwan’s economic challenges are not limited to the imposition of higher US tariffs, it also includes US pressure to increase defense spending, currency valuation and risks from holding too much US debt, Chinese Nationalist Party (KMT) Chairman Eric Chu (朱立倫) said on Wednesday.
Speaking at a meeting of the KMT’s Central Committee, Chu said that Wednesday last week — when the US placed steep tariffs on its trading partners — represented “the death knell of global free trade.”
“The era of globalization is over. It is being replaced by the rise of protectionism,” he said.
Photo: Tu Chien-jung, Taipei Times
US President Donald Trump has since his campaign frequently spoken of his plans to impose tariffs and demanded other countries increase their defense spending, Chu said.
Taiwan was slapped with a 32 percent tariff, despite major investments in the US by Taiwan Semiconductor Manufacturing Co, and moves to increase national defense spending and purchases of US goods, he said.
Trump has promised US$1 trillion in defense spending this year, equivalent to 3.5 percent of the US’ GDP, and Taiwan might be pressured to reach a similar spending ratio, Chu said.
There is also the issue of currency valuation, he said.
“Taiwan will face strong demands [from the US] to allow the New Taiwan dollar to rise, which will deal a heavy blow to export-oriented industries,” Chu said, adding that the government must be prepared to respond.
Chu also pointed out risks connected to Taiwan’s holdings of US debt, which comprise 92 percent of the nation’s US$577 billion of foreign exchange reserves.
“How much of this will Taiwan be able to redeem?” he asked.
Chu said the NT$88 billion (US$2.68 billion) special budget proposed by the government to mitigate the impact of US tariffs and broader financial uncertainty was “only a drop in the bucket” of what is needed.
The impact on labor and the consumer market also needs to be addressed by the special budget, he said, adding that the KMT would propose spending at least NT$200 billion.
As an export-oriented country, Taiwan cannot be completely reliant on the US and should instead learn from the example of Singapore, Chu said.
Only by not neglecting any markets can Taiwan get itself on a new road to prosperity, he said.
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