The direct impact of the extraordinary, “Liberation Day” US tariff regime is bad for Taiwan. The indirect effects may prove to be graphically worse.

Direct impact

Taiwan is America’s primary ally — and paramount geopolitical asset — in the South China Sea. Nevertheless, the initial US tariff imposed on Taiwan on 2 April comprised the new, 10% universal baseline tariff plus a “reciprocal tariff” creating a steep total tariff of 32%.

Next, as America’s chaotic “ tariff tantrum” unfolded, the White House soon announced, after the US stock and bond markets had up-ended themselves, that the additional “reciprocal tariffs” were being paused for 90 days for a range of jurisdictions — including Taiwan — “to allow for trade negotiations”.

The US is Taiwan’s largest export destination accounting for more than 25% of its exports, which include hi-tech equipment, automotive parts and petrochemicals. Taiwan’s governing Democratic Progressive Party, led by President Lai Ching-te, has taken a softly-softly approach in responding, wary of upsetting its assumed primary protector. Many in Taiwan are more concerned than ever about “the challenges and uncertainty ahead".

President Trump’s bottom-line view of Taiwan is also far from sunny. According to The Guardian:

Trump has suggested that Taiwan, like European Nato countries, is exploiting the US security umbrella and not paying enough for its own defence and he has criticised Taipei for supposedly monopolising the semi-conductor market at the expense of US jobs_._

One influential American view, quoted by the Rand Corporation, is that Taiwan’s defence spending, at 2.45% of GDP, is far too low and that it should be “more like 10%, or at least something in that ballpark”.

Indirect........

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