Trump’s Tariffs Aimed at China Would Raise Costs in Taiwan

Taiwan’s chief trade negotiator is fighting for an exemption to the import tariff hikes announced this month by U.S. President Donald Trump, a testament to how the measures targeting China would spill over to at least one other major Asian industrialized economy.

John Deng, chief negotiator of the cabinet Office of Trade Negotiations in Taiwan, visited Washington last week to seek exemption from steel tariffs of 25 percent and aluminum tariffs of 10 percent. As of Monday the two sides had not reached agreement.

Taiwan-based producers of parts sold onward to China for final assembly of other goods may pay more as well for exports to the United States, analysts in Taipei say. That scenario will come true if Washington goes ahead with plans announced last week to raise tariffs on $50 billion worth of Chinese products.

“Once the big Sino-U.S. trade war starts, not just the (Taiwan) president’s national security units but also related cabinet departments will all closely monitor it and make good responses,” Taiwan Premier William Lai told reporters Friday.

“The most important follow-up is that our economic development measures definitely need to be carried out,” he said.

Steel in the spotlight

China was the world’s biggest steel producer in 2016, when it churned out half a global total of 1.63 billion tons, World Steel Association data show. China’s steel imports to the United States total about 0.01 percent of the Chinese GDP that’s worth about $12 trillion.

But the U.S. steel tariffs do not target only China. Taiwanese manufacturers would take a hit as exporters of finished steel goods to the United States, analysts say. The United States was Taiwan’s third largest steel market in 2016, taking 1.1 million metric tons. 

Canada and Mexico received temporary exemptions on U.S. steel and aluminum tariffs earlier in the month. Taiwan is trying for the same.

Taiwan might have a harder case because it gets much of its raw material from China, analysts say. Even if Taiwan got an exemption from the United States, raw materials suppliers in China might raise prices to offset U.S. tariffs aimed their way.

“Because Taiwan has a lot of companies of that type — manufacturers of steel and aluminum — they import raw material from China, and that’s the thing that the United States minds the most,” said Lin Nan-chun, economist with SinoPac Securities in Taipei. 

“So…the firms that import for production in Taiwan and then export to the United States will be rather heavily impacted if exported to the United States,” she said.

​After returning from the United States Sunday, Taiwan’s trade negotiator said he was “optimistic” about getting an exemption, the local Central News Agency reported. 

Consumer electronics sourced from Taiwan

Trump’s government moved on Thursday from steel to an announcement of increases in tariffs on Chinese imports, across categories, valued at $50 billion. Washington will publish a tentative list of products and seek public comment for 30 days. 

The U.S. government may pick consumer electronics from China as part of its tariff-hike phase announced Thursday, analysts in Asia say. That move could affect Taiwanese tech hardware firms — a pillar of the island’s economy — that are located in China and export to the United States. Hon Hai Precision, for example, assembles iPhones for Apple.

Taiwanese firms also sell precision parts to Chinese electronics developers, which in turn may sell finished goods to the United States.

Semiconductors made up 62.6 percent of Taiwan’s total high-tech exports in the first 10 months of 2017, according to Ministry of Finance data. Flat panels and wireless transmission devices were the second and third highest of all types of tech hardware. Half of those parts for consumer electronics landed in China, including Hong Kong, during that period. 

“The main issue is that Taiwan’s degree of participation in the global supply chain is high, and high participation in the supply chain means we make a lot of intermediate goods,” said Liang Kuo-yuan, president of Taipei think tank Yuanta-Polaris Research Institute. “So the biggest problem now is that Taiwan’s intermediate materials used for electronics are extremely high.”

If the Trump government raises tariffs on made-in-China petrochemicals, Liang added, it would indirectly hit Taiwan the same way.

Petrochemicals were worth about $60 billion, just under one-third of Taiwan’s overall manufacturing sector, in 2016.

your ad here

leave a reply: