Taipei, Dec. 28 (CNA) The Central Bank of the Republic of China (Taiwan) believes Taiwan faces a relatively low risk from the tariff hikes U.S. President-elect Donald Trump has threatened to impose when he returns to the White House in January, citing the Trump Risk Index compiled by the U.S.-based think tank Information Technology & Innovation Foundation (ITIF).
Trump once said that to him, "the most beautiful word in the dictionary is tariff" as he has threatened to raise tariffs on China-made merchandise by 60 percent and impose 10-20 percent tariffs on goods from other countries, which has raised uncertainty over global trade.
However, the central bank said in a report that Taiwan is categorized by the ITIF as a low risk country amid Trump's tariff threats.
The Trump Risk Index used quantitative metrics in four areas -- military spending, trade balance, toughness on China and anti-U.S. policies -- to assess which allies are most likely to face tariffs or other retaliatory measures.
The central bank said Taiwan is only evaluated to have high risks in the trade balance index, while its risks are low in the three other areas of military spending, toughness on China and anti-U.S. policies.
While considering the ratio of Taiwan's trade balance with the United States to its gross domestic product (GDP), the central bank said the upcoming Trump administration is expected to look the ratio of Taiwan's military spending to its GDP, its ties with China and mutual benefits in its trade policies toward Washington.
After assessing all of these four factors, the central bank said, the new U.S. government will decide how to use its tariff hike weapons so the risks faced by Taiwan could be relatively low.
Taiwan obtained a total score of 1.33 in the index, indicating its risk is lower than that of South Korea (0.16) and Japan (0.36), according to the index (higher scores represent lower risks).
In addition, the central bank said Taiwan boasts strong semiconductor and information and communications technology (ITC) industries which are capable of producing complicated and irreplaceable tech gadgets, so the impact resulting from Trump's tariff hikes on semiconductor and ITC industries could be limited.
However, the central bank cautioned Trump's tariff hikes could dilute Taiwan's semiconductor resources, hurt the country's industrial clusters as a whole and affect exports, investments and employment.
According to a hypothesis from the International Monetary Fund, if the U.S. imposes an additional 10 percent tariff on all of its imports, its trading partners could launch retaliatory measures, and under such circumstances, about one quarter of global trade is expected to be directly impacted, and global economic losses could continue for years.
Academia Sinica, the top research institution in Taiwan, said Taiwan and the U.S., and Taiwan and China are highly correlated with each other economically so if the U.S. and China's economy weakens, Taiwan's economy will suffer. Economist Lin Chang-ching (林長青) said Trump's tariff hikes and domestic tax cuts could slow down the global economy and worsen investment environments, so his policies have become a common concerns of many countries.
Echoing Academia Sinica, the Chung-Hua Institution for Economic Research (CIER), which has forecast Taiwan's GDP growth will reach 3.1 percent in 2025, said if the U.S. and China stay stable, Taiwan's GDP growth could hit 3.2 percent, while if Washington and Beijing do not fare well economically, Taipei's growth could be cut to 2.93 percent.
While Trump's policy has created uncertainty for the global economy, CIER President Lien Hsien-ming (連賢明) said efforts at artificial intelligence development could continue to drive the global economy ahead, adding that global risks and opportunities will co-exist in 2025.
According to a recent survey conducted by CIER, 28.7 percent of respondents in the local manufacturing sector are participating in the AI supply chain or planning to develop AI applications to enter the supply chain.
