The nation’s two major economic research institutes last week warned that US president-elect Donald Trump’s return to the White House would create uncertainty for Taiwan’s foreign trade outlook and Taiwanese firms’ global investment plans, given his extreme policy proposals on tariffs, corporate taxes and border security. They urged Taipei to communicate clearly with Washington on trade issues and pay close attention to any changes in US policies so that Taiwan can prepare contingency plans.
Taiwan Institute of Economic Research president Chang Chien-yi (張建一) said at a seminar on Thursday that the key word next year would be “trade,” while Daniel Liu (劉大年), director of the Regional Development Study Center at the Chung-Hua Institution for Economic Research, said at a conference on Friday that “tariffs” would be the main focus of Trump’s trade policy.
On the campaign trail, Trump repeatedly threatened to impose an additional 10 to 20 percent tariff on all goods imported into the US, as well as levy a 60 percent tariff on Chinese goods once he returns to office.
He said it would incentivize companies to return to the US to manufacture goods. Regardless of whether Trump’s trade proposals are simply campaign rhetoric, in his first term, he raised tariffs on imported Chinese products four times.
Trump would likely use the threat of imposing tariffs as a negotiating tactic and bargaining chip to win concessions from China and the US’ key trade partners.
The Republican Party has reclaimed control of the US Senate and is likely to retain control of the US House of Representatives, enabling Trump to govern without obstacles. He could use his executive power to adjust or implement new policies to cut taxes and tighten immigration, or repeal the policies of US President Joe Biden, such by as removing subsidies or preferential treatment for industries such as semiconductors and green energy.
Moreover, Trump’s dislike of manufacturing “offshoring” and his willingness to escalate a trade and technology rivalry with China are likely to accelerate the realignment of global supply chains, which warrants close attention from Taiwanese firms.
The prospect of a reduction in the US’ military commitments to its allies and a smaller US role on the international stage during the “Trump 2.0” era would also affect economies in the region, including Taiwan and South Korea.
Trump has voiced his dissatisfaction with the US’ rising trade deficit and Taiwan’s trade surplus with the US, which might exceed its surplus with China this year. If the next Trump administration implements high tariffs, Taiwan’s exports would be significantly affected, so the government must start formulating contingency plans.
Trump’s second term in office could be characterized by higher US tariffs and other protectionist measures on imports, and a wider range of pressures on China and on those who do business with China.
Whether it is trade, tariffs, semiconductors or protection fees, many challenges could lie ahead for Taiwan in the next four years.
The government must make early adjustments to cope with the new Taiwan-US relationship, and investors should expect greater market fluctuations in the near term amid uncertainty until Trump takes office.
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