Tariff rate deemed 'temporary' by William Lai
The US has implemented a temporary 20% tariff on goods from Taiwan, effective next week, as formalized in an executive order signed by President Donald Trump. This tariff rate, however, is just the beginning of the negotiations, with Taiwan aiming to avoid a looming 32% U.S. tariff rate scheduled for August 1, 2025, under President Trump's reciprocal tariff campaign.
Taiwan is currently negotiating with the US to make substantial concessions, including large investment offers, to potentially lower the tariff rate to 15%. The US is reportedly demanding that Taiwan match large investment commitments made by countries like Japan and South Korea, with a US$300-400 billion package being considered by Taiwan to achieve this.
The tariff rate set by the US exceeds those granted to regional competitors like Japan and South Korea. The effect of the tariffs on Taiwan might be more severe than their rates alone would suggest, given that the New Taiwan dollar has gained about 11 percent against the US dollar this year.
Despite the tariff on most goods, key Taiwanese exports, such as semiconductors, are largely exempt from the new tariffs. However, the status of chip exports within these trade negotiations is not explicitly detailed in the available sources. The overall trade negotiation environment and export control measures could indirectly impact chip exports, as trade and political tensions are high, with the US making concessions to China possibly affecting broader export control policies.
Taiwan has pledged to bolster investment in the US and close export control loopholes for high-tech products. The government is awaiting the outcome of a US investigation under Section 232 of the Trade Expansion Act, and once the result is finalized, it will publish news concerning the joint statement.
In response to the trade imbalance, Taiwan has signaled it would step up its procurement of US goods, including energy, agricultural products, and military equipment. The tariff impact on many Taiwanese exporters has been significant due to a much stronger exchange rate, but Taiwan recorded a trade surplus of about US$65 billion with the US last year, driven by strong US demand for Taiwanese technology products.
Amidst these negotiations, President William Lai of Taiwan expects to negotiate a lower tariff rate and has urged the Cabinet and the Legislative Yuan to implement the proposal without delay to support small and medium-sized enterprises. The Taiwanese government has proposed a Special Act for Strengthening Economic, Social, and National Security Resilience in Response to International Circumstances, earmarking NT$930 billion (US$30.97 billion) in relief funds.
Trade talks between the US and Taiwan are continuing, and a final agreement is close. The effective average tariff on shipments from Taiwan would rise to 8.3% from 5.8%, but Taiwanese exports to the US last month surged to a record US$17.3 billion, as firms rushed to ship goods ahead of the new tariffs taking effect. The government, under a confidentiality agreement, is prevented from publicizing negotiation details before the talks are concluded.
[1] [Source] [2] [Source] [3] [Source] [4] [Source]
- The ongoing trade negotiations between the US and Taiwan involve discussions about Taiwan potentially lowering the tariff rate on goods through significant investments, with a proposed US$300-400 billion package under consideration, according to [Source 2] and [Source 4].
- The US-Taiwan trade talks are political in nature, as the US is reportedly demanding that Taiwan match large investment commitments made by countries like Japan and South Korea, a move that could impact the finance and business sectors in both countries, as reported in [Source 3].
