Tomorrow is the US’ big tariff day, when US President Donald Trump is set to announce reciprocal levies to address rising US trade deficits. Trump said he aims to increase tariffs on imports from all countries to match the rates they charge on US goods. The calculation for the 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.
Taiwan could be among the White House’s “dirty 15,” or countries with the highest trade surpluses with the US, that the Trump administration targets for reciprocal tariffs. Last year, Taiwan’s trade surplus with the US surged 83 percent year-on-year to US$73.9 billion — the seventh-largest in the world behind China, the EU, Mexico, Vietnam, Ireland and Germany, US customs data showed. Taiwan’s electronic components industry, including semiconductors, and the computer, electronic and optical products industry are at the highest risk of facing reciprocal tariffs, as they constitute the nation’s major exports to the US.
While the US might offer some relief from the levies to countries that engage in trade and investment talks that Trump views as favorable to the US, not all can be negotiated away. Trump’s economic agenda aims not only to reduce US trade deficits and revitalize US manufacturing, but to also make up for a shortfall in revenue due to the US president’s plans to cut taxes.
Uncertainties are likely to linger after tomorrow’s announcement, as Trump could expand his tariff list or raise rates whenever he deems fit during his second term through 2028. On the other hand, retaliatory measures from other countries appear to be much heavier and broader based on the US tariffs that have been announced thus far, as the White House’s prime targets are more prepared than during his first administration. As a result, the uncertainty surrounding global trade is expected to last longer than expected, along with significant economic implications as heated trade disputes carry on.
The final tariff outcome and the implications of the levies still hinge on negotiations between Taiwan and the US, as well as the strategies the government and businesses take to navigate the trade risks. Economics and finance officials have in the past few weeks emphasized that the effects of Trump’s tariff policy on Taiwan would be manageable and that the government is confident about the nation’s economic growth and inflation outlook. Still, they acknowledged external uncertainties from tariffs and key policies of major economies, as well as geopolitical events that could weigh on global growth.
While government officials have pledged to expand Taiwan’s export markets, enhance supply chain resiliency and boost investment in the US to address Trump’s tariff policy, efforts to maintain sound cost structures, create flexible business models and move up the value chain are equally important for local firms to sail through the trade uncertainties. However, as the rules of international trade have changed and the principles of promoting the free flow of capital and goods across borders are under growing threat of protectionist measures, Taiwanese firms must consider more non-economic factors in their operations.
Another critical factor for Taiwanese businesses is intermediate goods that are sourced from Mexico, Southeast Asia and South America, assembled into final products and shipped to the US. That has been a “China Plus One” investment strategy for firms to realign supply chains and avoid overconcentration on China over the past few years. It is under the spotlight, as the Trump administration threatens to impose high tariffs on those goods as well. While promoting more investment in the US, the government and businesses still need to respond to potential geopolitical challenges, and the risks of technology outflow and industrial chain disruption.
