Taiwan to seek lower rate after Trump’s ‘temporary’ 20% tariff

Taipei – Taiwan vowed on Aug 1 to seek a lower tariff after US President Donald Trump imposed a “temporary” 20 per cent rate on its shipments as part of his global trade war.

Mr Trump’s announcement was part of a sweep of measures – reaching 41 per cent – against dozens of global partners as they scrambled for deals with Washington to avert the painful tolls.

The figure is down from the 32 per cent toll imposed in his April 2 “Liberation Day”. Taipei and Washington have held four rounds of face-to-face talks and multiple video conferences to resolve the issue.

On Aug 1, Taiwan President Lai Ching-te said on Facebook they were still working to strike an agreement

“The US has announced a temporary 20 per cent tariff for Taiwan, with the possibility of further reductions should an agreement be reached,” he wrote.

“The government will continue to strive for a reasonable tariff rate and complete the final stages of the tariff negotiations.”

While Mr Trump had set Aug 1 as the deadline for agreements to be made, he delayed it until the end of next week.

No timeline was given for Taiwan, which could mean the island was caught in the middle of US-China trade negotiations, said Dr Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis.

Washington and Beijing held two days of talks this week aimed at reaching a deal to extend a truce in their trade war and prevent the reimposition of sky-high tariffs on Aug 12.

“The conditions on Taiwan might be relevant for China, imagine export controls,” Dr Garcia-Herrero told AFP.

After US tech giant Nvidia announced it will resume sales of its H20 AI chips to China, Dr Garcia-Herrero said “there could be other stuff that China needs from Taiwan that the US can offer”.

‘This is the ceiling’

Taiwan is a global powerhouse in chip manufacturing, with more than half the world’s chips and nearly all of the high-end ones made there.

The owner of a Taiwanese machinery exporter to the United States said he was worried that lower tariff rates on Japan and South Korea – 15 per cent – would advantage his competitors there.

He told AFP the recent appreciation in the Taiwan dollar against the greenback had also “put a lot of pressure on us, creating a double whammy”.

The uncertainty over tariffs was hurting US sales, said textile producer Eddie Wang, with clients “feeling overwhelmed” and reluctant to place orders.

Soaring demand for artificial intelligence-related technology has fuelled its trade surplus with the US – and put it in Mr Trump’s crosshairs.

Around 60 per cent of Taiwan’s exports to the US are information and communications technology, which includes chips.

To avoid the punitive tariffs, Taipei has pledged to increase investment in the US, buy more of its energy and increase its own defence spending.

While Washington does not recognise Taiwan as a country, it is the democratic island’s most important backer and biggest arms supplier.

Economist Sun Ming-te said the 20 per cent levy was “probably the best outcome Taiwan can achieve with the US under the current conditions”.

“This is the ceiling, and it can go lower in the future,” Dr Sun, from the Taiwan Institute of Economic Research, told AFP.

The Cabinet in Taipei said on Aug 1 that Taiwan “will continue to actively negotiate with the United States to reach an agreement and promote Taiwan-US economic and trade cooperation”.

Mr Trump in April imposed a 10 per cent tariff on almost all US trading partners while announcing plans to eventually hike this level for dozens of countries.

But days before the steeper duties were due to take effect on July 9, he pushed the deadline back to Aug 1.

Taiwan Vice-President Hsiao Bi-khim said recently that the government wanted a trade deal with Washington that “will benefit both sides”.

“The US is indeed a very important trade partner for Taiwan,” she said.

Washington also “needs Taiwan in supporting resilient supply chains, in supporting manufacturing and some high-end technologies”.

In the weeks leading up to Aug 1, several economies – the European Union, Britain, Vietnam, Japan, Indonesia, the Philippines and South Korea – struck pacts with Washington, while China managed to temporarily lower tit-for-tat duties. AFP