On April 2 – which Donald Trump dubbed “Liberation Day” – the U.S. president introduced large tariff hikes on almost all U.S. buying and selling companions, together with 32 % fee on Taiwan. Inventory markets have been fast to react within the lead-up to April 9, the date that Trump’s tariffs would have gone into impact. On April 7, shares for the Taiwan Inventory Change, or Taiex, plunged by 9.7 %, triggering a circuit breaker that quickly halted buying and selling. This was the most important one-day drop in historical past for Taiex. Emergency circuit breakers have been additionally triggered in different Asian markets, equivalent to Japan.
Subsequent days have confirmed comparable when it comes to market volatility. Shares rallied when Trump introduced a 90-day suspension of tariffs, with Taiwan included within the listing of nations that can see tariffs of 10 % as an alternative of the charges Trump introduced on April 2. But the Monetary Supervisory Fee introduced that measures to forestall quick promoting would remain in place for this week. Margins for brief promoting have been raised from 90 % to 130 %, the restrict of intraday promote orders was reduce to three % from 30 % of the common buying and selling quantity of inventory from the previous 30 periods, and guidelines on forms of collateral that can be utilized to cowl margin deficits have been loosened.
Trump’s authentic plan for 32 percent tariffs for Taiwan was notably solely 2 factors lower than China, which initially confronted 34 % in tariffs. Analysts had anticipated that Trump may lash out economically at Taiwan, with Trump having beforehand accused Taiwan of “stealing” the U.S. semiconductor business. Taiwan has additionally lengthy confronted accusations from the USA of intentionally undervaluing its foreign money, although Washington has traditionally stopped short of labeling Taiwan a foreign money manipulator – probably for political causes.
Certainly, Trump’s animus towards Taiwan has usually returned to the difficulty of semiconductors. When Taiwanese semiconductor manufacturing big TSMC introduced a $100 billion funding plan in the USA in March, Trump appeared to change his tune, calling TSMC CEO C.C. Wei “one of the revered individuals in enterprise.” But blended indicators from the Trump administration made it unclear as as to if semiconductors can be exempted or included in tariffs.
Present indicators are that the Trump administration’s tariff exemptions for electronics are only temporary, with Trump saying that particular tariffs for semiconductors can be announced within the subsequent week. Shortly earlier than Trump’s feedback, Commerce Secretary Howard Lutnick had prompt an extended timeframe, saying that tariffs on semiconductors can be introduced in a month or two.
For its half, the Pentagon has emphasized that army ties with Taiwan will proceed, regardless of the uncertainty over commerce. The Division of Protection very in all probability hopes to separate U.S. commerce coverage from its protection coverage, when it comes to public perceptions. But it is going to be laborious to keep away from a conflation of the 2 in Taiwan, particularly with Trump having prompt up to now that Taiwan ought to pay the USA for protection. Trump has repeatedly prompt that Taiwan is a freeloader on U.S. munificence.
It comes as no shock, then, that the Trump administration’s tariffs have change into an object of home political competition between the Democratic Progressive Occasion (DPP) of President Lai Ching-te and the Kuomintang (KMT). Whereas the “Liberation Day” tariffs are international and hit shut U.S. allies and companions throughout the board, the KMT initially referred to as on the Lai administration to reshuffle the Cupboard as a way to take duty for failing to keep away from the tariffs. Later, each events met to debate countermeasures to the tariffs, however this has not prevented partisan competition.
After information of the tariffs broke, Lai shortly announced that Taiwan wouldn’t search reciprocal tariffs. Lai later revealed an op-ed in Bloomberg suggesting that Taiwan and the USA might deepen financial relationships to hunt joint prosperity.
However this led to criticism from KMT politicians, who mentioned Lai had adopted a weak stance. KMT legislator Hsu Yu-chen argued that Taiwan ought to reply with tariffs. Pan-Blue media commentator Jaw Shaw-kong, who was the KMT’s vice presidential candidate in 2024, argued for suspending TSMC and UMC investments in the USA as a negotiating tactic. KMT legislator Luo Chi-chiang went a step additional in calling on Individuals to recall Trump in a social media put up that was later deleted. Luo maybe didn’t understand that there isn’t a provision for recalling a president in both the USA or Taiwan at a time when the KMT is dealing with a wave of recall campaigns.
There has additionally been back-and-forth between the pan-Blue and pan-Inexperienced camps concerning the notion of subsidies to alleviate affected industries. In early April, KMT chair Eric Chu and legislative caucus chief Fu Kun-chi initially demurred on the concept of subsidies for business. Such hesitancy was probably as a result of quantity of political capital staked by the KMT earlier this 12 months on drastically decreasing the federal government’s operational price range within the identify of fiscal steadiness. It could be seen as a reversal to right away name for bailouts for business in response to the tariffs.
However, Chu and Fu have now shifted toward calling for subsidies and, the truth is, criticized the DPP for less than approving 88 billion Taiwanese dollars (US$2.7 billion) in funding for business reduction measures. Chu referred to as for NT$200 billion, whereas Fu now helps NT$140 billion in subsidies for business, which the KMT had beforehand sought to chop.
Trump has now backed off of the Liberation Day tariffs for at the least 90 days, as an alternative specializing in an escalating tariff battle with China. Trump acknowledged that international locations that don’t search to retaliate towards the USA shall be “rewarded.” Measures referred to as for by the KMT would have probably led to ire from the Trump administration.
Some segments of the KMT, nevertheless, may very well hope to undercut Taiwan-U.S. ties on this means, as an alternative in search of a return towards financial engagement with China. In response to the tariffs prompting a lot uncertainty about Taiwan-U.S. relations, the KMT has returned to usual canards about Taiwan needing Chinese language tourism, arguing that Taiwan ought to search to redouble financial ties with China. It’s possible that as uncertainty concerning the Trump administration’s actions continues, the KMT will additional lean into this narrative, consistent with proposals to reintroduce the controversial Cross-Strait Companies Commerce Settlement – the proposed free commerce settlement with China that sparked the 2014 Sunflower Motion – within the 2024 presidential election cycle.
Broadly talking, the KMT continues to lean into the U.S.-skeptic political narratives that started throughout the first Trump administration. Actually, the uncertainty and turmoil of the Trump administration present fertile floor for U.S.-skeptic political narratives. However a political technique of merely lashing out at any measures proposed by the DPP and calling for the other is probably not notably efficient transfer for the KMT both. In truth, at a time when the KMT faces an unprecedented wave of recall campaigns concentrating on all KMT legislators, this might extra in all probability merely energize these already angered on the get together’s actions.
