Taiwan firms advised to ignore 30% tariff on Mexico until it is final

Taipei, July 13 (CNA) Taiwanese companies should wait until the United States finalizes its new tariff policies before making strategic adjustments in Mexico, a key destination for Taiwanese overseas investment, scholars advised on Sunday.

The advice came in response to U.S. threats to impose a 30 percent tariff on Mexico, set to take effect on Aug. 1.

On July 7, U.S. President Donald Trump signed an executive order extending the deadline for so-called "reciprocal" tariffs and issued 20 tariff  letters to major trade partners. On Saturday, he announced that both Mexico and the European Union would be subject to the new tariffs, urging them to reach trade deals with the U.S. by Aug. 1.

Dachrahn Wu (吳大任), director of the National Central University Research Center for Taiwan Economic Development, said that while Trump has a history of announcing high tariffs to pressure countries into making concessions, the proposed rates have not yet been finalized, leaving room for negotiation.

"Taiwanese firms should not act hastily," Wu said, "as land purchases and factory construction involve large capital outlays. A premature response could result in capital withdrawal and sharp declines in asset values."

He suggested companies wait until after Aug. 1, when the U.S. trade policy picture is expected to become clearer, before revising their overseas investment strategies.

In recent years, amid the global nearshoring trend, more than 300 Taiwanese companies have invested in manufacturing facilities in Mexico, taking advantage of its proximity to the U.S. market.

Wu said that if tariffs are imposed, Taiwanese firms operating in Mexico will face rising costs and declining competitiveness. Nevertheless, even if a 25 or 30 percent tariff is eventually levied on Taiwan itself, there may still be opportunities to negotiate for a reduced rate, he said.

Echoing Wu, Darson Chiu (邱達生), an economist at Tunghai University, said that although countries have received tariff notifications from Trump, the rates are not final and there is still room for negotiation.

However, the uncertainty created by Trump's recent move has added complexity to Taiwan's negotiations, Chiu said.

Chiu explained that even though Taiwan Semiconductor Manufacturing Co. (TSMC) has announced plans to invest another US$100 billion in the U.S. and make advanced chips there, Trump's priority is that countries "fully accept" his terms during trade negotiations.

For example, Japan sent representatives to Washington for talks seven times since April, but due to its firm stance on cars and rice, the U.S. recently announced a 25 percent tariff rate on Japan -- 1 percentage point higher than in April.

Regarding Taiwan, Chiu noted that President Lai Ching-te (賴清德) and the Executive Yuan recently reaffirmed that public health will be protected in trade negotiations with the U.S.

This may signal a continued refusal to ease regulations on imports of U.S. pork and beef, he said. However, if the U.S. threatens to impose high tariffs on Taiwan in the future, there is no need for immediate concern, as negotiations would still be possible, he added.

In addition, the implementation date for reciprocal tariffs may not be firmly set for Aug. 1, Chiu said.

According to official statistics, Taiwan's investment in Mexico amounts to around US$3 billion, employing over 50,000 people.