U.S. President Donald Trump has imposed what he says is a "discounted" reciprocal tariff of 32% on Taiwan, half of 64%, the White House's calculation of Taiwan's trade barriers against the United States. To understand where this number comes from and what Taiwan can do to negotiate with Washington, TaiwanPlus speaks to Hsieh Chang-tai, economics professor at the University of Chicago.
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00:00So, Trump has calculated this 64% number to reflect the barriers it believes Taiwan has
00:07against U.S. products, and that's how it got to their figure of 32%, which is half of that.
00:13Can you help us understand where this 64% comes from?
00:19It's obviously not a 64% tariff.
00:21I mean, there is no 64% tariff.
00:25If you look at the details of how they are calculating it, they are saying that there's
00:32a lot of policies that effectively act as tariffs, but it's all hidden, right?
00:39So what they're doing is that they're looking at the countries that have a large, that the
00:44U.S. has a large trade deficit with, or on the other side, countries that run a big surplus
00:48with the U.S., and they're basically saying that that must be because these countries
00:53impose hidden tariffs on U.S. products.
00:58But so do you think it is a fair move that the U.S. has now imposed 32% tariffs on Taiwanese
01:05goods?
01:06There are two questions.
01:07One is that what the Trump administration is doing makes no sense whatsoever.
01:13At the same time, you know, that for the last 20 years in terms of its macroeconomic policy,
01:20Taiwan has been running these unsustainable trade surpluses that does itself huge economic
01:27damage.
01:28And what's coming back to this case, it's also creating tremendous political damage
01:35with respect to the U.S.
01:37My sense is that nobody ever took, nobody in Taiwan ever took sort of the problem with
01:44of the trade surplus that Taiwan has seriously, that they were all focused on trying to make
01:49a deal and thinking that they could make a deal with semiconductors.
01:54Why is it that Taiwan's trade surplus with the U.S. has grown so big?
01:59And what can they do now to fix it?
02:03The short answer and the maybe oversimplistic answer is this idea that we have to keep our
02:11exports competitive.
02:13And the corollary to that idea is that exports are good and imports are bad.
02:19It really is explicitly the policy of the policies of the central bank that has led
02:24us to this place that we are now.
02:28Taiwan obviously has to be very careful and not pissing off the Trump administration because
02:33it could end up in the same seat that Zelensky was in.
02:38This could also be an opportunity for, I mean, this could be the equivalent of a 1973 moment.
02:461973 was like the first crisis that Taiwan faced when the world, when the world price
02:51of oil tripled.
02:53So the response of Taiwan to that world crisis is to say the model, the economic model that
03:00we were pursuing up until then was, was no longer viable.
03:05And obviously that doesn't generate results in the short run.
03:07It took 15 more years for something to come out of it.
03:11And right now, I think the broader issue is that Taiwan is, it's like a lot of Taiwanese
03:17companies still have this low wage, cutting costs to the bone model.
03:22This might be a time for us to say, okay, given that the world is now, if we believe
03:25the world has fundamentally transformed, we need a new paradigm.
03:32We need a new model.
03:34What could that be?