Taiwan’s central bank governor, Yang Chin-lung (楊金龍), addressed lawmakers on Thursday, offering a measured analysis of the economic impact of Donald Trump’s trade policies on Taiwan. Speaking during a session at the Legislature’s Finance Committee, Yang reassured legislators that while the election of Trump could introduce greater uncertainty into the global trade landscape, Taiwan’s trade relationship with the U.S. remains mutually beneficial.
In his comments, Yang also explored potential strategies for Taiwan to address its trade surplus with the U.S. and minimize the risk of facing new tariffs under a possible Trump administration.
Impact of Trump’s Trade Policies on Taiwan
As Taiwan continues to maintain a substantial trade surplus with the United States, standing at a record US$48 billion in 2023, many lawmakers have expressed concerns that this could put Taiwan in the crosshairs of Trump’s protectionist policies. During his previous presidency, Trump’s focus on reducing the U.S. trade deficit led to high-profile tariffs on Chinese goods, and there are concerns that his renewed push for tariffs could extend to Taiwan.
However, Yang stressed that much of Taiwan’s export to the U.S. consists of Information and Communications Technology (ICT) products, where both nations share complementary strengths. “The U.S. excels in product design, while Taiwan is an advanced manufacturer. The U.S. needs our products,” Yang said, emphasizing the mutual benefit of the trade relationship.
Taiwan’s Strategy to Mitigate Trade Imbalances
To address the lopsided trade balance, Yang suggested that Taiwan could look into increasing purchases of American energy, agricultural goods, and military products. Additionally, he highlighted the investments by Taiwanese firms, such as TSMC (Taiwan Semiconductor Manufacturing Company), in the U.S. as another way to reduce the trade deficit.
Taiwan has already made significant investments in the U.S., and increasing these investments could not only improve the trade balance but also enhance economic ties with the United States, especially in key sectors like semiconductors and advanced technology.
The Risk of Tariffs Under a Trump Administration
During his remarks, Yang also addressed the potential escalation of tariffs under a second term for Trump. He noted that during Trump’s first term and continuing under President Joe Biden, the U.S. imposed tariffs averaging 19.3% on Chinese exports, and 3% on other countries. However, if Trump proceeds with his plans to significantly raise tariffs — including increasing tariffs on Chinese goods from 20% to 60%, and on other countries from 3% to 10% — it would constitute a major shift in trade dynamics.
Yang expressed doubt that such drastic increases would be feasible, particularly for consumer products, where the U.S. is highly dependent on imports from China. “I keep thinking to myself, is 60% really possible?” Yang remarked. He pointed out that while such tariffs could apply to specific sectors like electric vehicles, lithium batteries, and solar panels, consumer goods would likely see much lower tariffs due to the strong reliance on imports.
Market Uncertainty and Strategic Analysis
Yang acknowledged the uncertainty created by Trump’s unpredictable policy moves, stating that financial markets tend to struggle with such uncertainty. “For financial markets, uncertainty is a big problem,” Yang said. He pointed out that while Trump’s trade policies could create significant challenges, the full scope and timing of these policies remain unclear.
Yang also stated that Taiwan would closely monitor the actions of the U.S. Federal Reserve and other international economic developments, especially since the policies and actions of the incoming Trump administration have yet to materialize in full. As the situation develops, Yang emphasized the need to refrain from making speculative predictions while keeping a close watch on any new trade initiatives.
Strategies for Taiwan’s Economic Resilience
Despite the potential challenges posed by trade protectionism, Yang remained optimistic about Taiwan’s economic outlook. Taiwan’s export-driven economy, with its key sectors in technology, semiconductors, and manufacturing, positions the country to adapt to shifts in global trade.
Yang also underscored the importance of diversifying Taiwan’s trade partnerships to reduce the country’s economic vulnerability. Expanding exports to emerging markets and increasing Taiwan’s global investment footprint could offer alternative avenues for growth, lessening the country’s dependence on the U.S. market.
FAQ – Frequently Asked Questions
1. What is Taiwan’s trade surplus with the U.S.?
Taiwan’s trade surplus with the United States grew to a record US$48 billion in 2023, driven primarily by exports of ICT products and high-tech manufacturing.
2. How does Taiwan’s trade relationship with the U.S. benefit both countries?
Taiwan excels in advanced manufacturing, while the U.S. leads in product design. The complementary strengths of both countries create a mutually beneficial trade relationship, with Taiwan exporting key electronics and semiconductors to the U.S.
3. What could Taiwan do to address its trade surplus with the U.S.?
Taiwan could consider increasing its purchases of American energy, agricultural goods, and military products. Additionally, investments from Taiwanese firms like TSMC in the U.S. could help balance the trade relationship.
4. What impact could Trump’s tariffs have on Taiwan?
Trump has proposed raising tariffs on Chinese goods from 20% to 60%, and on goods from other countries, including Taiwan, from 3% to 10%. While these increases could affect specific sectors, consumer products are likely to remain unaffected due to the U.S.’s reliance on imports.
5. How is Taiwan preparing for the uncertainty surrounding Trump’s trade policies?
Taiwan’s central bank will closely monitor Trump’s policies and adapt strategies accordingly, particularly focusing on diversification of trade partnerships and enhancing economic resilience in key industries.
Conclusion: Navigating Global Trade Uncertainty
Taiwan’s central bank governor, Yang Chin-lung, provided valuable insights into the challenges and opportunities presented by the changing trade dynamics under a potential second term for Donald Trump. While tariffs and protectionist measures pose risks, Taiwan’s strong manufacturing base and strategic partnerships in technology and semiconductors provide a solid foundation for continued economic resilience. Taiwan must continue to adapt to evolving global trade policies, with a focus on diversification and strategic investment, to safeguard its economic future.
For more updates on Taiwan’s economy and trade policies, visit CialisWeb.tw.
