Taiwan should raise U.S. purchases to address trade issues: Central Bank

Taipei, Nov. 13 (CNA) Taiwan's Central Bank has suggested that the government should increase purchases from the United States in response to the likelihood the country will remain on the U.S. currency watchlist after Donald Trump takes office as U.S. president.

In a report to the Legislature released Wednesday, the Central Bank cautioned that if Taiwan's trade surplus with the U.S. continues to grow, being on Washington's currency manipulation watchlist could become the "new normal."

To narrow the trade surplus, the bank suggested increasing purchases of energy, farming produce and military products from the U.S., one of Taiwan's major trading partners.

The Central Bank pointed out in the report that Trump's trade policies could heighten global trade conflicts and technological competition. Among those policies, tariffs are expected to have the largest global spillover effect.

As global markets anticipate Trump's new policies, there will be considerable volatility in short-term financial markets, the Central Bank said.

If the U.S. raises tariffs globally and causes trade friction, the global supply chain will be reorganized drastically, impacting economic growth and inflation around the world, the Central Bank analyzed.

The reorganizing of the global supply chain could also raise operational expenses for global firms, driving up inflation. Taiwan must pay attention to spillover effects from global inflation as many of the nation's manufacturers rely on imports of raw materials, the bank said.

As Taiwan's exports, private investments and economic growth are highly susceptible to shifts in the global economy, Taiwanese businesses could change their global deployments amid the reorganization of the global supply chain.

Such change may directly impact the momentum of Taiwan's export growth and investors' willingness to invest domestically, which could have a negative impact on economic growth, the report added.

On the other hand, if the U.S. increases trade sanctions against China, Taiwan could benefit from redirected orders originally placed in China, as happened during Trump's first term as president from 2017-2022.

However, the extent of any potential benefit remains to be determined.

The Central Bank has always had good communications with the U.S. Treasury Department, and both sides will continue to discuss matters such as macroeconomic and currency policies, the bank said.

Although U.S. trade policies are highly volatile and may bring about fluctuations in the domestic financial market, the Central Bank will adopt appropriate measures to ensure the stability of the domestic exchange market, it said.

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