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Why Taiwan is one of the Biggest Winners in the China-US Trade Wars

Posted by johnsmith001 on August 1st, 2020

Most economists would argue that there are no gainers in trade wars, but this may only apply to the two competing economies. The trade wars between China and the United States may have negative impacts on the two economies. Still, it has also led to the unintended consequence of benefiting some economies. Most economies, mostly in South East Asia, will benefit from a shift of manufacturing from China to other countries to avoid tariffs and the diversion of imports into other countries. Indonesia economy, Vietnam economy, Singapore economy and Philippines economy are some of the South East Asia economies that stand to benefit, while Taiwan economy stands as the overall winner.

A study released by the United Nations Conference on Trade and Development (UNCTAD) in November 2019 identified Taiwan as the biggest winner of the trade friction between China and the US. U.s imports from Taiwan in the first half of 2019 increased with a margin of US.2 billion, mostly due to increased trade in communication equipment and office machinery sectors.

Taiwan as an Export Powerhouse

Unlike other Asian economies like the service-driven Indonesia economy growth, Taiwan is an export-oriented economy majoring in machinery and technology. America has shifted its imports from China to Taiwan, especially for communication equipment and office appliances as they are the worst by the tariffs. Chinese businesses also prefer Taiwanese Tech firms as parts suppliers as a result of the ‘de-Americanisation’ campaign in China after the US government‘s tariffs on Chinese tech companies.

Shifting Production

Most of the Taiwanese manufacturing companies that moved to China are also considering moving out of China or diversifying production in a bid to avoid the American tariffs on Chinese imports. Taiwan is an obvious choice for such companies because the Taiwanese government has introduced favourable policies such as the relaxation of the land use regulations and expanded tax breaks. There is a huge competition from other Asian countries like Vietnam and India, but Taiwan has recorded several companies that have applied for the InvesTaiwan program.

Taiwan Funds Pulling From Mainland China

Taiwan is also benefiting from the effect of Taiwan funds returning home from mainland China. According to CBS, 93 Taiwanese businesses had returned to Taiwan as at July 2019, and others are preparing or have already begun their home returning process. As a result, the Taiwan growth forecast in 2019 was adjusted up to 2.62%.

Closer Relations with the U.S

During the former US Deputy Secretary of State Richard Armitage’s visit to Taiwan on 12 June 2019, the president of Taiwan Tsai Ing-Wen said that the relationship between the two countries was the best they ever had in recent years. The warm relationship can last for several years, given that the US Congress is coming up with new laws that will provide a legal basis for establishing US relations with Taiwan. Other Laws such as the Taiwan Travel Act of 2018 and the Taiwan Assurance Act of 2019 also show‘s increased support for Taiwan from the United States of America.

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Also See: Trade Wars, United States, Taiwan Funds, South East, Taiwan, China, Us

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