Taiwan’s central bank warned yesterday that it sees peril in the proposed trade policies of the incoming administration of US president-elect Donald Trump.
In a report to the Legislative Yuan ahead of central bank Governor Yang Chin-long (楊金龍) taking questions from legislators today, the central bank said that if Trump follows through on his policy promises, it would escalate trade conflicts throughout the world, and stifle competition in the tech industry.
“The map of global trade is in the process of being redrawn and will likely affect Taiwan’s export momentum in the future,” the report said.
Photo: Reuters
The central bank said that the aggressive tariff policy Trump promised on the campaign trail would be the most impactful trade policy of the administration, if implemented.
A threat by Trump, who is to take office in January, to impose tariffs of 60 percent on US imports of Chinese goods poses major growth risks for China, the world’s second-largest economy and Taiwan’s top trading partner.
Trump also floated the idea of a 10 percent universal tariff on all US imports.
If the US raises tariffs globally and causes trade friction, the global supply chain will be reorganized drastically, impacting economic growth and inflation around the world, the central bank said.
The reorganizing of the global supply chain could also raise operational expenses for global firms, driving up inflation. Taiwan must pay attention to spillover effects from global inflation as many of the nation's manufacturers rely on imports of raw materials, the bank said.
As Taiwan's exports, private investments and economic growth are highly susceptible to shifts in the global economy, Taiwanese businesses could change their global deployments amid the reorganization of the global supply chain, it said.
Such change may directly impact the momentum of Taiwan's export growth and investors' willingness to invest domestically, which could have a negative impact on economic growth, it added.
Taiwan was a target of Trump’s rhetoric in this year’s campaign. Trump suggested that Taiwan, under threat from China should pay for the protection of the US and accused Taiwan of “stealing” the US semiconductor industry.
“The new US trade policies under Trump could impact Taiwan’s financial outlook through multiple channels,” the report said.
The US last year ran a US$48 billion trade deficit in goods with Taiwan, a major producer of semiconductors for clients including tech giants such as Apple Inc and Nvidia Corp.
In the report, the central bank cautioned that if Taiwan's trade surplus with the US continues to grow, being on Washington's currency manipulation watchlist could become the "new normal."
To narrow the trade surplus, the bank suggested increasing purchases of energy, farming produce and military products from the US.
The central bank has always had good communications with the US Department of the Treasury, and both sides will continue to discuss matters such as macroeconomic and currency policies, it said.
The central bank said it would continue to monitor implementation of major changes in US policies, and gradually adjust the outlook for inflation and the economy, while responding with appropriate monetary policy to ensure the stability of the domestic exchange market.
Vice Premier Cheng Li-chun (鄭麗君) would head a working group on trade and technology cooperation with the new US government, the report said.
Additional reporting by CNA
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