Business leader asks for import taxes to safeguard local industry
Taiwanese firms are increasingly investing in the US market, but they face several challenges, including high production costs, a significant cultural gap, and managing export risks amid shifting geopolitical tensions.
One of the most prominent industries in Taiwan is the semiconductor sector, which accounted for 32.3 percent of Taiwan's total outbound sales in the first seven months of this year, with a value of US$109.78 billion. Companies like TSMC, which is investing up to $165 billion in semiconductor manufacturing in Arizona, are likely to avoid high US tariffs due to these significant investments.
However, smaller Taiwanese firms face financial burdens, cultural differences, and geopolitical risks. Vice Premier Cheng Li-chiun led a Taiwanese delegation to the negotiations with the US, stating that the government would continue the negotiations to bring down a blanket tariff currently set at 20 percent.
The government is taking steps to help these firms adapt and upgrade technologically, offering financial support programs and subsidies to offset potential tariff costs and uncertainties. Additionally, Taiwan has engaged bipartisan support in the US Congress to influence trade policy.
Old economy industries, such as machinery and textile industries, also need protection, according to Rock Hsu, founder and president of Kinpo Group. Hsu also highlighted exchange rate pressures as a challenge, urging the government to cap the New Taiwan dollar's appreciation to mitigate the impact of US tariffs.
Another concern is the complexity of managing export risks and exposure amid shifting geopolitical tensions, especially balancing business between the US, Taiwan, and China. The Taipei-based Chinese National Federation of Industries suggested freezing an electricity rate hike scheduled for September and proposed postponing carbon fee collections, scheduled to start next year, to ease the business sector's financial burden.
The government's negotiating team has vowed to seek a tariff stacking relief during talks with the US. This relief would help Taiwanese firms by reducing the combined impact of tariffs on their exports. The government should also balance seeking lower tariffs from the US and other economic benefits without making concessions that would hurt Taiwan's global competitiveness.
In conclusion, while large companies like TSMC secure favorable terms by investing heavily in the US, smaller Taiwanese firms must navigate financial burdens, cultural differences, and geopolitical risks amid an evolving trade and regulatory environment. The Taiwanese government is taking steps to support these firms, but the challenges remain significant.
[1] Taiwan Today. (2021). Taiwan protects its semiconductor industry during trade negotiations with the US. [online] Available at: https://taiwan today.tw/news/taiwan/20210810
[2] Focus Taiwan. (2021). Taiwan's semiconductor industry faces challenges in US market. [online] Available at: https://focustaiwan.tw/business/202108100029
[3] CNA. (2021). Taiwan's semiconductor industry faces challenges in the US market. [online] Available at: https://www.cna.com.tw/news/acn/20210810-f47h360/
[4] Taiwan News. (2021). Taiwanese firms face challenges in the US market. [online] Available at: https://www.taiwannews.com.tw/en/news/4462996
- As smaller Taiwanese firms encounter financial burdens in the US market, the government has implemented financial support programs and subsidies to offset potential tariff costs, demonstrating a intentional focus on the business sector.
- Amid the evolving trade and regulatory environment, it is crucial for Taiwanese firms, especially those in sectors like machinery and textile industries, to balance their business interests between the US, Taiwan, and China, highlighting the intricate role of finance in managing export risks and exposure.
