US President Donald Trump on Thursday directed the US trade representative and commerce secretary to complete all studies related to the so-called reciprocal tariffs by April 1, as he aims to increase US tariffs to match the rates other countries charge on imports. The calculation for the reciprocal tariffs includes not only the countries’ tariff rates, but also their non-tariff barriers, such as subsidies to industries, regulations, value-added taxes, exchange rate policies, and intellectual property protection and enforcement.
For decades, the US has set tariffs through negotiations at international trade bodies, such as the WTO. Trump wants to break with global trade norms and leave it entirely up to US officials to set tariffs based on their own calculations. It diverges from the multilateral framework under the WTO, which aims to constrain powerful economies and minimize economic bullying in international trade. Trump believes that countries with huge trade surpluses with Washington are taking advantage of the US, and that the decline in the country’s manufacturing and the disappearance of jobs are all caused by trading partners’ unfair practices. Therefore, his decision to roll out reciprocal tariffs would help reduce trade deficits, protect domestic industries and restore fairness, the White House said in a fact sheet.
It is hard to gauge the effects of Trump’s reciprocal tariffs on other countries and the global economy, because it is unclear how the new rates would be calculated and there are no concrete details. However, as the rates to be charged would be studied over the next few weeks, that provides an opportunity for countries to negotiate with the US before any new tariffs are imposed.
Taiwan could be a target of Trump’s reciprocal tariffs. Last year, it was the sixth-largest contributor to the US trade deficit, at US$74 billion, following China, Mexico, Vietnam, Ireland and Germany, but ahead of Japan, South Korea, Canada and India, data provider CEIC said. Meanwhile, WTO data showed that Taiwan’s average nominal tariff rate for imported goods is 6.5 percent, while the average US tariff rate is 3.3 percent, with the tariff disparity between the two sides particularly notable in the agricultural and transportation equipment sectors.
The effects of reciprocal tariffs might be broader than expected for Taiwan, as the US has indicated that non-tariff barriers, such as value-added taxes and exchange rate policies, could also be grounds for the new tariffs, making the potential effects unpredictable. Trump has previously raised issues with Taiwan over semiconductors and threatened to impose up to 100 percent tariffs on Taiwanese chips. Some experts said that Taiwan would remain largely unaffected, as the nation’s direct semiconductor exports to the US are relatively modest. Many Taiwanese chips are assembled into finished electronic products, such as servers, mobile phones and computers, either in Taiwan or third-party countries before being shipped to the US. However, others said Trump could use tariff threats to achieve other goals, such as pressuring Taiwan Semiconductor Manufacturing Co to increase US investments or collaborate with Intel Corp in the foundry business.
So far, President William Lai (賴清德) has pledged to boost Taiwan’s investment in the US and spend more on national defense in response to Trump’s tariff threat. Lai’s administration should also push for a major trade negotiation with the US, as the countries make fierce diplomatic efforts to avoid more tariffs. The government must also establish a special team composed of diplomatic personnel, and officials from national security, defense, finance and economic ministries to regularly visit the US and communicate with White House officials. In addition, the government needs to take more measures to support key domestic industries that are likely to be hit by rising global economic pressures if the WTO system collapses and countries all move to protect their industries.
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