Trump signs executive order, Taiwan's tax rate is 20%, higher than Japan and South Korea
On August 1, Taipei time, US President Trump signed an executive order officially announcing reciprocal tariff rates for various trading partners. Taiwan will be subject to a 20% tariff, higher than the 15% tariffs for Japan and South Korea, and slightly higher than Thailand's 19%. According to the White House executive order, the new tariffs will take effect at 12:01 PM Taipei time on August 7.
In his executive order, Trump reiterated that the United States' long-term and large annual trade deficit in goods poses an abnormal and significant threat, endangering the national security and economy, so he declared a national emergency and imposed reciprocal tariffs.
He said that some trading partners have agreed or are about to agree to reach meaningful trade and security commitments with the United States, but other trading partners, although participating in the negotiations, have proposed conditions that fail to fully address the imbalance in bilateral trade relations or fail to align with the United States on economic and national security issues.
According to the annex to the executive order, tariff rates for Asian countries include: 20% for Taiwan, 15% for Japan, 15% for South Korea, 19% for Thailand, 20% for Vietnam, 19% for the Philippines, and 40% for Myanmar. Countries not listed in the annex will be subject to a uniform 10% tariff. Taiwan's tariff has been reduced to 20% from the 32% initially proposed in April, but remains higher than its neighboring countries, Japan and South Korea.
President Lai emphasized temporary measures and the negotiating team continued its efforts.
On August 1st, President Lai Ching-te posted on Facebook that the US had informed Taiwan's negotiating team in Washington that Taiwan's "temporary tariff" would be 20%. He explained that this was primarily due to negotiation procedures, as both sides had not yet completed their summary meeting. Therefore, the US had announced a temporary 20% tariff for Taiwan, with the possibility of further reductions if an agreement was reached. The two sides will also discuss supply chain cooperation and Section 232-related issues.
Source: Facebook President Lai Ching-te posted on Facebook on August 1 that the US informed Taiwan’s negotiating team in Washington that Taiwan’s “temporary tariff” is 20%.
President Lai thanked the negotiating team for their hard work. Under a tight timeframe, after four rounds of physical consultations and multiple videoconferences, they have now concluded technical negotiations, remaining committed to the four priorities of safeguarding national interests, protecting industrial interests, protecting public health, and ensuring food security. He emphasized that while the tariffs announced by the US are only temporary measures, the administration will continue to strive for reasonable tariffs and complete the final stages of the tariff negotiations.
Executive Yuan spokesperson Lee Hsien-chih stated that Taiwan and the United States have reached a "certain degree of consensus" on issues such as tariffs, non-tariff trade barriers, trade facilitation, supply chain resilience, and economic security. Cooperation, investment, and procurement opportunities were also discussed. Negotiations are still underway for a joint statement, which will be released after the U.S. government makes a final decision.
The conditions for the agreement reached between Japan and South Korea have been revealed. Does Taiwan still have room to reduce its prices?
According to Trump's executive order, some trading partners have agreed or are close to agreeing to meaningful trade and security commitments with the United States. Goods from these countries will continue to be subject to the tariffs listed in the annex until Trump issues a subsequent order after an agreement is reached. Taiwan, categorized as a country close to, but not yet close to, reaching an agreement, remains subject to further tariff reductions.
Japan has pledged to invest $550 billion in the United States in exchange for a 15% tariff, but the two sides have differed on the nature of the investment. The United States claims Japan will invest according to Washington's instructions, but Japan claims this figure includes financing and loan guarantee structures, with actual investment accounting for only 1% to 2% of the total.
South Korea has pledged to provide $350 billion in investment, with Trump emphasizing that "the investment will be for American-owned and controlled investments, with the president personally selecting the investment projects." South Korea will also purchase $100 billion in natural gas and other energy, and fully open up to trade with the United States, imposing "zero tariffs" on the US.
According to Politico, a person familiar with the Taiwan-US negotiations described it as "U.S. trade negotiators are squeezing Taiwan like lemon juice. The United States wants to obtain every right to enter the Taiwanese market." The scope of the negotiations covers issues such as investment, procurement, and Taiwan-US economic and trade cooperation.
Semiconductor tariffs are yet to be announced, but the impact on the industry is limited
For Taiwan, the more critical issue is semiconductor tariffs. The national security investigation initiated under Section 232 of the US Trade Expansion Act is likely to yield results in the next two weeks. Currently, the EU semiconductor tariff is 15%, with Japan receiving the most favorable tariff. The tariffs for Taiwan and South Korea, two major semiconductor powerhouses, have yet to be determined.
According to the reciprocal tariff exemption list released by the US Customs in April, the electronics industry has largely escaped the impact. Most Taiwanese exports to the US are included in the exemption list, and only about 20% are actually affected. According to CommonWealth Magazine, the impact on Taiwan is approximately US$34.8 billion. If a 32% tariff is imposed, it would increase inflation by 0.02% and reduce GDP by 0.03%.
The Executive Yuan stated that its April assessment of the impact of US tariffs primarily targeted export industries, and now that imports are also being assessed, adjustments will be made to the Special Act on Strengthening Economic, Social, and National Security Resilience in Response to International Circumstances. The NT$93 billion in subsidies allocated to combat tariffs will be properly reallocated. Taiwan's recent AI boom has seen significant growth in the production of automatic data processing machines, such as servers, now accounting for 46.2% of Taiwan's exports to the US, demonstrating the importance of the technology industry in US-Taiwan trade.
Taiwan's tariffs announced! Lai Ching-te: 20% is only temporary, is there room for negotiation and reduction? This article was first published on CryptoCity.