U.S.-Taiwan Tariff Deal Turns Industry Headwinds to Tailwinds

Economic Minister Ming-Hsin Kung yesterday (Jan 20th) suggested the U.S.-Taiwan tariff agreement was beneficial for the domestic industry. With reciprocal duties capped at 15% and non-additive to MFN rates, the imposed tariff rates have shifted from an overall net negative to positive for Taiwan. Traditional sectors in machine tools and machinery are now equally competitive with Japan and Korea, while other industries, including plumbing, bicycles, hand tools, and plastics, are increasingly gaining a competitive advantage.

As the think tank estimates a 0.01-point GDP lift from the 15% rate, Minister Kung noted that now, at 15% non-additive and positive market signals, firms can focus on the growth and development of innovations and technologies.

According to a ministry-commissioned think tank analysis, the trade deal's impact has gone from negative to positive. The lift from 32% to 20% additive has minimized sectoral strain, while 15% non-additive delivers net gains, with U.S. exports increased by 0.04 to 0.08%, GDP growth at 0.01 points, and industrial jobs have increased by 206 to 329 job opportunities. Although market price has increased and demand has decreased, Taiwan’s competitive advantage generates a greater substitution effect than demand losses; the overall net effect is therefore weighted positively.