US president-elect Donald Trump, who returns to the White House next month, once said that “tariff” is the most beautiful word in the dictionary and threatened to launch a “tariff war” after taking office. That would involve an additional 10 to 20 percent duty on all goods imported into the US and up to 60 percent on all imports from China.
Think tanks and research institutes have developed different models to assess the risks the moves would create for Washington’s trade partners. Some consider countries’ defense spending and trade balance with the US, while others review variables such as a nation’s reciprocal trade policy with the US and their position on China in assessing the potential “Trump risk.”
The Information Technology and Innovation Foundation on Dec. 9 released a report listing 39 US allies that might be at risk from Trump’s tariff and other retaliatory measures. Based on the institute’s “Trump Risk Index,” the country with the highest risk is Mexico, followed by Thailand, Slovenia, Austria and Canada.
The five countries that are in the safest positions and free from retaliatory trade measures are Lithuania, Estonia, Poland, Latvia and Australia, ahead of the Netherlands, the Czech Republic, Denmark and Greece to round out the top 10 safest, it showed. Taiwan ranked 31st as a country with relatively low risk. Among other Asian countries, the Philippines ranked 17th, Japan ranked 25th and South Korea 22nd.
The central bank said Taiwan was only rated as high risk in running trade deficits with the US, while the country’s defense spending as a share of GDP, efforts to ally with the US in pushing back against China’s rising military, foreign policy and techno-economic hegemony, as well as its US-friendly policies that benefit US technology companies and promote intellectual property protection, help rate the country as at low risk of facing additional tariffs.
However, if Trump imposes tariffs on all imported goods and requires companies to manufacture in the US or increase the proportion of US manufacturing, Taiwan’s semiconductor resources could be spread thin and weaken domestic industrial clusters, which would affect Taiwan’s exports, domestic investments and local employment, the central bank said.
Academia Sinica’s Institute of Economics earlier this month warned the economy would face greater economic uncertainties next year, especially from Trump’s tariff measures and retaliatory actions by other countries, which would create interlocking problems. As Taiwan has long forged close economic and trade relations with the US and China, any sign of a slowdown in the world’s two largest economies would inevitably weaken Taiwan’s growth momentum, it said.
Under the institute’s baseline scenario, Taiwan’s GDP is expected grow 3.1 percent next year, following an estimated 4.23 percent growth this year. If China’s and the US’ economies are stable, Taiwan’s GDP is expected to expand by 3.2 percent next year. However, if both perform poorly, the growth rate could fall to 2.93 percent, the institute said.
Still, comprehensive tariff increases by the US require the US Congress’ approval and actual tariff adjustments on Taiwanese goods are not expected to be implemented until the end of next year at the earliest, as they generally require investigations and negotiations, Yuanta Securities Investment Consulting Co said in a report last week. Although the potential tariff hikes would affect Taiwanese exports and indirectly impact its re-exports through China, they are also expected to result in order transfers and increase the market share of Taiwanese products in the US market, Yuanta said.
None of this is to say that Taiwan can be complacent about the existential danger posed by Trump’s tariff policy, as the incoming administration would definitely look at ways other countries contribute to the US’ rising trade deficits. Instead, the nation must take Trump’s threats seriously as we enter a new era of US power.
RSS