U.S. tariff disparity with competitors has Taiwan industries worried

Taipei, Aug. 1 (CNA) Taiwan's business community warned on Friday that the 20 percent tariff baseline imposed by the United States on goods from Taiwan could erode the country's competitiveness, and it urged the government to step up efforts to negotiate a lower rate.

In a statement, the Taiwan Association of Machinery Industry (TAMI) said the elevated tariff rate would deal a heavy blow to the local machinery sector, especially given that key Taiwan competitors Japan and South Korea were only hit with a 15 percent tariff.

The disparity could severely undermine Taiwan's position in the U.S. market, leading to a loss of orders placed with local manufacturers that further shrinks their role in global supply chains, TAMI warned.

According to industry statistics, Taiwan's machinery manufacturers currently face U.S tariffs ranging from 2 to 5 percent on machine tools and around 8 percent on components and parts -- rates set to rise by 20 percentage points when the new rate takes effect on Aug. 7.

The Chinese National Federation of Industries echoed similar concerns, saying the new tariff's impact on small and medium-sized enterprises, especially in electronics manufacturing, a backbone of Taiwan's export economy, should not be overlooked.

"A 5 percent gap in tariff rates between Taiwan and its regional peers would place us at a distinct disadvantage," Frank Hsu (許凱勝), an importer based in the U.S., told CNA, and he urged the government to press ahead with negotiations to secure more equitable trade terms.

On July 31 (Washington time), the White House unveiled new tariff floors for countries with which the U.S. has a trade deficit, setting Taiwan's rate at 20 percent.

That was down from the 32 percent imposed in April but later paused until now, following several rounds of negotiations between Washington and Taipei.

Earlier Friday, President Lai Ching-te (賴清德) said the 20 percent tariff rate was "tentative" and that negotiations will continue after the U.S. concludes a Section 232 investigation under the Trade Expansion Act of 1962 into possible tariffs on semiconductor imports.

Lai said tariff negotiations between Taiwan and the U.S. were linked to Washington's Section 232 probe of the semiconductor industry because exports of Taiwanese semiconductors, ICT products, and electronic components are the main contributors to the bilateral trade deficit.

The results of the investigation are expected to be announced in two weeks, U.S. Commerce Secretary Howard Lutnick said Wednesday.

Speaking at a forum Friday, economist Mason Li (李鎮宇) praised the Lai administration's strategy of linking the negotiation on the baseline tariff with the tariff on semiconductors, rather than treating the two separately.

Li argued that this approach could help secure more favorable tariff terms for Taiwan's chip exports, and that if that turned out to be the case, it would be a success for Taiwan.

Kevin Yeh (葉俊麟), a California-based accountant, offered a contrasting view.

He argued that Taiwan's semiconductor strengths, though significant, might fall short as a bargaining chip unless Taiwan also meets U.S. demands for greater agricultural and automobile market access.

The U.S. is primarily concerned with opening markets for its agricultural and automotive products to reduce the trade deficit, he said.

"Taiwan must also prepare to better negotiate demands for market openings and not just prioritize its semiconductor industry."