Taiwan is formulating a response to potential tariffs from the United States, which are expected to be announced on April 2, 2025. This comes amid a significant trade surplus that Taiwan holds with the U.S.
Here’s a breakdown of the situation:
1. Taiwan’s Trade Surplus with the U.S.:
- Taiwan’s trade surplus with the U.S. has significantly increased in recent years. In 2024, it reached $64.9 billion, a more than sevenfold increase from $8.4 billion in 2017.
- This surplus makes Taiwan the sixth-largest country with a trade deficit with the U.S.
- In 2024, Taiwan became the 7th largest trading partner of the U.S., with total trade in goods reaching $158.6 billion.
- Taiwan’s exports to the U.S. in 2024 hit a record $111.4 billion, primarily driven by demand for high-tech products, especially semiconductors, where Taiwan holds a dominant global position.
- The substantial increase in the trade surplus is attributed to the rising U.S. demand for Taiwan’s technology products.
2. Potential U.S. Tariffs:
- The U.S. is considering imposing “reciprocal tariffs” on countries with high trade surpluses.
- Taiwan is likely to be among the targeted economies, given its significant surplus.
- The Trump administration has identified 15 countries, referred to as the “Dirty 15,” with the highest trade surpluses with the U.S., and Taiwan is reportedly on this list.
- Potential tariffs could target sectors like automobiles and auto parts, with discussions of a 25% tariff on imported cars.
- There’s also mention of tariffs on semiconductors, a critical export for Taiwan.
3. Taiwan’s Planned Response:
- Taiwan’s government is taking the threat of tariffs seriously and has been developing response plans for over two months.
- Increasing U.S. Energy Imports: A key strategy involves boosting imports of energy products from the U.S., particularly natural gas. Taiwan’s state-owned CPC Corp signed a letter of intent to buy liquefied natural gas from Alaska. They are also considering increasing oil imports from the U.S.
- Reducing Tariffs: Taiwan is considering lowering its own tariffs on certain U.S. products to balance trade. This includes potential tariff reductions on vehicles and health supplements.
- Highlighting Mutual Benefits: Taiwan is emphasizing the mutually beneficial nature of the trade relationship, particularly in the semiconductor industry, where U.S. designs are manufactured in Taiwan.
- TSMC Investment in the U.S.: Taiwan is also pointing to investments made by Taiwanese companies, such as TSMC’s significant investment in U.S. chip manufacturing facilities, as a contribution to reducing the trade imbalance.
- Communication and Diplomacy: President Lai Ching-te has stressed the importance of communication with the U.S. to ensure that the new administration understands Taiwan’s role as an indispensable partner in the U.S. manufacturing and technology sectors.
4. Concerns and Implications:
- Taiwan is concerned about the potential economic impact of significant U.S. tariffs, especially on its crucial tech exports.
- There is speculation that the tariffs could be particularly high for Taiwan due to the size of its trade surplus.
- Taiwan’s government is preparing to support industries that might be affected by the tariffs.
- Despite the risks, some analysts believe that Taiwan might receive a reprieve or face lower tariffs compared to other countries due to its crucial role in the semiconductor supply chain and recent efforts to increase imports from the U.S.
In summary, Taiwan is proactively planning its response to potential U.S. tariffs, focusing on increasing energy imports, reducing its own tariffs on specific goods, and emphasizing the strategic importance of the bilateral trade relationship, especially in the technology sector. The actual impact and details of the U.S. tariffs are expected to become clearer after their anticipated announcement on April 2, 2025.
