As Donald Trump suspends tariffs on countries except China, businesses across Asia are scrambling to figure out what to do now and in the future. TaiwanPlus gathered a panel of experts, including Nick Marro of the Economist Intelligence Unit and Helen Chiang of IDC Asia Pacific, to discuss how companies and investors are responding.
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00:00So, Nick, let me start with you. Asian stock markets are reacting positively to the news that Trump's reciprocal tariffs on all countries except China have been suspended.
00:10But besides stock markets, where else are you seeing reactions from businesses and investors?
00:15I think the main thing we can focus on right now is a bunch of different markets and companies now realize that they suddenly have a 90 day window to ship as many goods as they possibly can to the U.S.
00:26before tariffs, in theory, snap back in early July.
00:31I think what this is going to result in is a mad dash in terms of orders, in terms of freight, in terms of production.
00:38And so talking to business leaders, talking to companies on the ground here in Hong Kong and in mainland China, there is this sense of anxiety and urgency to make sure that if this opportunity is given, people don't waste it.
00:51Let me turn to you, Helen. What about semiconductors specifically?
00:55They were exempted from the tariffs, but Trump says a special semiconductor tariff is coming soon.
01:01How might this affect Taiwan's biggest industry?
01:03So if this will happen, basically, the new tariff will increase the cost of the coal materials, like the wafers, gases and other important semiconductor materials.
01:15And of course, if the cost is higher, that will definitely further to impact the end device market.
01:20So like the PC or smartphone, the price will be higher than before.
01:26So like PC plus smartphone takes around 27% for this old semiconductor market.
01:32And data center, this infrastructure takes around one third.
01:35So integrated circuits are only part of the Taiwanese export basket to the U.S.
01:40I think Helen has done a good job explaining that chips go into a lot of finished goods that, as a result, we can see a bit of a domino effect across the entire supply chain.
01:47When we think about the other goods that are at risk, so phones, laptops, other kinds of devices, these are, in theory, subject to this reciprocal tariff.
01:57And so any exemption to integrated circuits would only shield the Taiwanese economy to a degree.
02:02If we had seen these tariffs be completely adopted as scheduled, then we would have expected a pretty sharp fall off in Taiwan's GDP.
02:11We were specifically considering revisions of around 1.5 to 2 percent.
02:15And our previous forecast was around 3.5 percent growth this year.
02:19That would bring us down to around 2 percent instead, which doesn't sound bad, but is a pretty big shock for Taiwan.
02:24China is the only country for which the tariffs will take effect, and they've retaliated with tariffs of their own.
02:31If this U.S.-China tariff war becomes the new normal, how might that affect global trade, and is there any chance that Taiwan could benefit from it?
02:40I mean, after a certain point, the tariff rates stopped mattering.
02:43I mean, Chinese suppliers, Chinese exporters were already operating on very thin margins.
02:48A 20 percent tariff would have been challenging.
02:50A 60 percent tariff would have been prohibitive.
02:52A tariff of 80 percent, 100 percent, 120 percent, that effectively acts as an embargo on Chinese goods coming to the U.S.
02:59Companies have already received the writing on the wall saying that sourcing from China is already not an option, and the U.S. is no longer a destination for these goods.
03:08And so there has to be alternative strategies to achieve this.
03:11Geopolitical risks are already encouraging China to double down on its self-sufficiency campaigns, particularly when it comes to its reliance on imported components.
03:18I think for Taiwan, that's important because China and Hong Kong combined are still Taiwan's largest export market.
03:24I think the first thing we should pay more attention is that for the tension between the two countries actually made more China becomes a self-sufficient country and advance indeed a semiconductor market.
03:38And of course, I'm not so sure how much benefit we can get.
03:42But of course, we have seen that most of the companies move their manufacturing site to U.S. like TSMC.
03:49So basically, U.S. still, the very big market for semiconductor takes around 20 percent.
03:55And also, most of the clients for advanced node for TSMC are U.S. companies.
04:01But of course, the high tariffs still a very strong strategy to hold the supply chain.
04:07Last question.
04:08Donald Trump has now pulled back on tariffs at the last minute, similar to his playbook with Canada and Mexico.
04:14Having done this twice now, do you think businesses and investors will find his future tariff threats credible?
04:20I think you raised a really good point about credibility, which generally is kind of under threat in the U.S. right now.
04:26The policy uncertainty is bad for business.
04:28It's bad for investment decisions.
04:30It's bad for hiring.
04:30It's bad for household spending.
04:32Based on this uncertainty alone, we actually now expect the U.S. to fall into a mild recession this year.
04:37And that's despite what's happening with tariffs when it comes to whether we can trust what Donald Trump is going to do in terms of further tariff escalation or de-escalation or even finding a trade deal.
04:48The amount of uncertainty that we have here is going to push people to diversify away from the U.S. market.
04:53Yeah, I think indeed, as Nick mentioned, because it's really hard to make a decision at this moment for enterprise now.
04:59As the companies we interviewed here, most of them actually would rather to wait for the other two, three years and suffering in this period.
05:08But the other thing I want to highlight is that currently we see most of the companies or countries actually build a more friendly, peaceful approach to U.S. government.
05:18But they didn't get responsible, the favorable response.
05:22So likely they were likely to build a regional trade relationship with other countries so that they can reduce the reliance on the single market.
05:36So I think that's definitely the thing that U.S. government would not want to see.