US-China trade war will help reduce Taiwan's reliance on China: economist

DBS economist Ma Tie-ying says that the US-China trade war is likely to have an upside for Taiwan and her partners in the Indo-Pacific

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(By Central News Agency)

TAIPE (Taiwan News) – As the trade war between China and the U.S. begins to heat up, concern is rising about how the conflict will impact Taiwan’s industries and companies with Chinese partners.

Ma Tie-ying (馬鐵英), an economist with the Development Bank of Singapore (DBS), has an optimistic message for Taiwan. She says that while the tariffs will affect companies that manufacture products in China bound for the U.S., the tariffs will not affect most Taiwanese exports.

The negative side to her prediction however is that the trade war still has potential to stall Taiwan’s GDP growth in 2019 if it persists. While the current forecasted GDP growth of 2.8 percent for 2018 remains unchanged, 2019 may only manage a gain of 1.8 percent under the current program of U.S. tariffs if they remain in place through 2019.

On the more positive side, Ma also asserts that the diminished number of Chinese products reaching the U.S. market will actually have the effect of increasing the competitiveness of Taiwanese manufactured products, especially electronics components.

What’s more, the longer that the trade war continues, the less attractive China will become as a manufacturing base for products that could otherwise be marketed in the United States. This will have the potential to start a trend of Taiwanese companies detaching some business links with China, ultimately reducing Taiwan’s overall reliance on China as a base for manufacturing.

Ma, quoted by Liberty Times, refers to this trend as a “scattering effect” which would represent Taiwanese companies decreasing their overall risks by diversifying production to multiple nations in the region, away from wholesale reliance on cheap labor in China.

A downturn in Taiwanese companies partnering with Chinese firms would also likely coincide with an increase in Taiwanese private investment in regional partner nations of the government’s Southbound Policy, thereby bolstering Taiwan’s business networks across the region.

Additionally, Ma notes that Taiwan’s stricter regulations and guards against IP theft still make Taiwan an attractive place for investment, especially among U.S. firms. So while reliance on China will likely decrease over the coming years, Taiwan’s competitiveness will grow in step along with a higher potential of strengthened trade relations with the U.S. as a result.