Taiwan should prepare response to possible U.S. Section 301 probe: Scholar

Taipei, Feb. 22 (CNA) Taiwan must act preemptively against potential Section 301 investigations as U.S. President Donald Trump moves to a new tariff strategy following a Supreme Court ruling that voided previous tariff measures, a scholar said Sunday.

Countries running the largest trade surpluses with the United States face a growing likelihood of Section 301 investigations, said Chung-Hua Institution for Economic Research President Lien Hsien-ming (連賢明).

Section 301 refers to a provision of the Trade Act of 1974 that allows Washington to impose retaliatory tariffs over perceived unfair trade practices, including the running of large trade surpluses.

Because Taiwan has become the fourth-largest source of the U.S.' trade deficit, totaling nearly US$160 billion, it will not be that difficult for Washington to build a case for a Section 301 probe, Lien said in a Facebook post on Sunday.

"Taiwan must brace for the next round of Section 301 investigations," Lien said, urging the government to prepare a response strategy without suggesting what it might be.

The problem for Taiwan is that its trade surplus with the U.S. has ballooned in the past two years due to massive demand for chips and servers for use in data centers or AI products, items that it specializes in.

• EXPLAINER / 5 things to know about the Taiwan-U.S. trade deal

Section 301 threat

Trump invoked Section 122 of the Trade Act of 1974 to impose a 15 percent global surcharge, up from 10 percent announced earlier, after the U.S. Supreme Court on Friday struck down tariffs he had previously imposed on trading partners, including Taiwan, under the International Emergency Economic Powers Act (IEEPA).

The Trump administration also vowed to leverage additional trade tools, including Section 301 investigations, to circumvent the ruling and press ahead with his tariff agenda.

Lien observed that Section 122 does not permit country-specific tariff rates and therefore would not necessarily reduce the trade deficit, but it allows the administration to quickly restore tariff coverage for up to 150 days without congressional approval.

Lien expected the Trump administration would increasingly rely on Section 232 of the Trade Expansion Act of 1962 -- a national security-based measure -- alongside Section 301 to restore differentiated tariff rates.

Taiwan's secured treatment

For the moment, all articles and parts of articles that currently are or later become subject to section 232 actions are exempt from the Section 122 temporary import duty, according to a fact sheet issued by the White House on Friday.

Taiwan and the U.S. signed the Agreement on Reciprocal Trade (ART) on Feb. 12, cutting tariffs to 15 percent from the previous 20 percent under the IEEPA, while Taiwanese semiconductors were granted "most-favored treatment" under Section 232.

The agreement has yet to be reviewed and ratified by Taiwan's Legislative Yuan, however.

In response to the latest developments, Premier Cho Jung-tai (卓榮泰) convened top officials Saturday to review the situation and later confirmed that Washington has clarified that Section 232 will remain unaffected by the Section 122 tariffs.

Cho said he has instructed Taiwan's negotiating team to stay in close contact with the U.S. to ensure the most-favored treatment already secured for Taiwanese semiconductors and other key products remains unchanged.

Monitoring trade risks

Vice Premier Cheng Li-chiun (鄭麗君), Taiwan's lead ART negotiator, acknowledged Saturday that Taiwan's position as a major contributor to the U.S. trade deficit remained the primary challenge throughout the negotiations.

Taiwan must vigilantly monitor evolving U.S. trade policies, ranging from Sections 122 and 301 to potential expansions of Section 232, Cheng said in a Facebook post Saturday.

Even Section 338 of the Tariff Act of 1930 -- which allows for retaliatory duties of up to 50 percent against countries deemed to be discriminating against U.S. commerce -- could come into play, she said.

President Lai Ching-te (賴清德) stated that the government's clear objective is to protect the favorable terms Taiwan has already secured.

Opposition's views

On Saturday, the Kuomintang (KMT), Taiwan's main opposition party, urged the government to renegotiate the Taiwan-U.S. ART, and clarify whether the agreement is still valid.

KMT's Johnny Chiang (江啓臣), the deputy legislative speaker, warned Sunday that Trump will utilize every measure possible to address trade deficits, and he called on the government to proactively manage the situation and help industries prepare for potential fallout.

Approached for a comment on Sunday, Taiwan People's Party Legislator Chang Chi-kai (張啓楷), said that since the trade issue is still evolving, Taiwan should "wait and see."

Chang suggested that Legislative Yuan delay reviewing the agreement until the U.S. policy direction becomes fully clear.

(By Tseng Ting-yun, Yeh Su-ping, Lin Kuan-ting and Shih Hsiu-chuan)

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