On the 1st March 2018, US President Donald Trump announced the introduction of taxes on the importation of steel and aluminium.
They will be 10% for aluminium and 25% for steel. These protectionist measures are directed against China. This country in very net overproduction is forced to break prices in order to sell most of its stock. This hurts its competitors and collapses world metals prices.
Indeed, a few days after this first announcement, the President came back on his decision by exempting by any tax all its main partners, ie South Korea, the EU countries, Argentina Australia, Brazil, Canada and finally Mexico.
This tax is particularly aimed at China because it would be a measure of national security for the United States. Indeed, according to them, the low prices practiced by Chinese companies are a danger because there are so many Chinese imports of steel and aluminium, which, in addition to possibly being of lower quality, decimate American companies (RTL).
First, Taiwan may not seem to be affected by these new measures. Indeed, few media speak of this small country eclipsed by the shadow of Chinese power. Then, we can see that this decision of President Donald Trump could have serious consequences. Indeed, the United States is the largest importer of steel in the country, as well as the sixth largest importer of aluminium, the repercussion would be really important. According to the Taiwannews newspaper, GDP could lose 0.8% because of these taxes, and if a trade war was to begin between the United States and China, it could go up to 1.8%, which would be a real disaster for the Taiwanese economy.
Some economists warned Taiwanese companies that depended too much on their products made in China and exported to the United States that it could be dangerous in case of a dispute between these two big countries.
Actually, this announcement was a huge bad surprise for Taiwan because the country thought that USA was their ally. Indeed, with the signing of the Taiwan travel act, the Taiwanese government now thought to be totally included in US relations. This new law allows senior US officials to travel to Taiwan and meet Taiwanese top leaders, and vice versa for their Taiwan counterparts. "The law encourages the US government to increase the level of official exchanges and communications between Taipei and Washington, paving the way for stronger relations between Taiwan and the United States," according to the Taiwanese Ministry (Taipei Time). Solid cooperation was thus emerging until this announcement made its appearance.
Taiwan's premier William Lai sees this as an opportunity to learn from his mistakes and therefore to evolve. He wants to stay positive. Indeed, on the 9th of March 2018, Minister John Deng went to Washington to negotiate a waiver like the one obtained by the main partners of America (South Korea, EU ...). But, this first contact failed because Donald Trump wanted to know the percentages of steel and aluminium made in China and then exported to his country. Once these percentages are obtained, the Taiwanese government can send a delegation to try a second time to negotiate in order to escape US taxes.
In parallel with these contacts with the United States, Taiwan is also preparing for a possible war trade. The Lai’s government is already starting to take lessons from these taxes inflicted by anticipating a possible war trade today between USA and China. Companies producing in China would then have several choices that would be available to them. They could decide to repatriate their factories on Formosa Island or moving them to Asia, America. Indeed, investing in the United States could boost the image of Taiwan and create jobs in America, which would increase the interest of the US government in these companies who could then resume trade without having to pay taxes on steel and aluminium.
As a conclusion, negotiations are still on going with the United States.
By becoming an ally of the Americans and strengthening their relations, the Taiwanese government thought to be sheltered from these taxes but the fact that many Taiwanese companies produce in China and then export to America seems to be a real problem for the President Trump. These negotiations are therefore to be closely monitored in order to know what solution will be found, if a solution is found...