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Rare Earths vs. Tariffs: The New Front in U.S.-China Trade Tensions
Taiwan Industry Sentiment Remains Cautious as U.S.-China Relations Ebb and Flow |
Recently, U.S.-China trade tensions have escalated once again. China announced expanded export controls on rare earth elements and advanced technologies, launched investigations into U.S. corporate mergers and acquisitions, and imposed additional port fees on American vessels. In response, the United States implemented 100% tariffs on Chinese goods beginning in November and introduced export restrictions on critical software, signaling further intensification of bilateral economic confrontation. Absent opportunities for de-escalation, global economic tensions are likely to continue deteriorating.
Driven by robust demand for new consumer electronics and sustained AI-related opportunities, exports of electronic and information technology products remained strong in September, leading manufacturers to express reduced pessimism regarding current and near-term business conditions compared to the previous month's survey. However, the oscillating nature of U.S.-China relations—alternating between periods of rapprochement and tension—combined with stalled progress in Taiwan-U.S. tariff negotiations, has kept manufacturing sector sentiment predominantly cautious. In the services sector, while financial industries benefited from strong equity market performance in September, the traditional Ghost Month dampened demand for durable goods including automobiles, home furnishings, and appliances. Additionally, as the summer travel season concluded and tourism activity moderated, retail and food service operators reported weaker monthly performance.
The construction sector benefited from recent project deliveries previously delayed by material cost inflation and labor shortages, driving improvements in construction progress and sales. Strong execution of public infrastructure projects, with budget utilization reaching multi-year highs, contributed to a notable sector recovery. ...Read more |
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| Balancing Tariffs Based on Institutional Differences Among Exporting Countries: Some Considerations |
| Trade liberalization and globalization have long dominated international economic thought and policy. However, when accounting for the complexities of economies of scale and imperfect competition, trade theory can no longer easily demonstrate that free trade represents the optimal policy. The benefits and legitimacy of free trade typically rest on fair competition. Yet fairness is far from straightforward, involving numerous factors and considerations. In international trade, the prevailing approach tends to identify what constitutes unfairness from a negative perspective, rather than positively defining fairness itself. Practices such as environmental degradation, labor exploitation, and intellectual property infringement are increasingly recognized as unfair. While some nations have begun resisting these practices, no universal institutional framework has emerged. Disparities in corporate tax rates across countries also generate unfair competitive advantages, though their effects are difficult to isolate given concurrent policies at play. In this era of globalization, enterprises can readily relocate resources across borders, making corporate tax burdens a strategic tool for attracting international investment. While lower tax rates may enhance firms' competitiveness through higher after-tax profits, it remains challenging to quantify which specific products benefit and to what extent. Moreover, since other producers also export similar goods, applying targeted tariffs to address such policies proves impractical. One contentious yet straightforward approach would allow countries to impose modest tariffs on different exporting nations based on their assessment of foreign policies. President Trump's reciprocal tariff concept bears some resemblance to this notion, though the U.S. relies on the flawed metric of trade deficits. The U.S. would be better served by reassessing these tariffs from a policy fairness perspective. By reducing them to appropriate levels and leading international discussions on tariff principles that reasonably offset competitive distortions from unfair domestic policies, it may be possible to establish a more equitable system than the current framework. |
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Taiwan Economic Research Monthly
Renewable Energy Credentials: Standards, Tracking, and International Integration |
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International trade frameworks increasingly mandate carbon emissions disclosure and origin verification as core requirements. The EU's Carbon Border Adjustment Mechanism imposes carbon-intensity tariffs on imports, while the US requires verifiable sourcing and carbon footprint documentation for energy products. These measures address carbon leakage prevention while establishing origin certification and emissions data as market access prerequisites, forming new trade barriers. Renewable energy attribute certification systems have gained prominence accordingly. Through standardization and digitalization, these systems enable full lifecycle transparency regarding renewable generation, carbon intensity, and energy sourcing, with third-party verification ensuring credibility. The EU and US pursue divergent regulatory pathways. The EU established a cross-border mutual recognition system centered on Guarantees of Origin certificates with integrated data repositories. The US combines regulatory mandates—including the Renewable Fuel Standard, California's Low Carbon Fuel Standard, and Inflation Reduction Act tax incentives—with market-based mechanisms. Both models converge on institutionalizing energy attributes. Taiwan must establish energy attribute certification and low-carbon hydrogen tracking systems aligned with international standards. Credible carbon accounting is essential to maintain export eligibility and policy effectiveness. Future institutional design should balance international alignment with domestic feasibility while establishing mutual recognition with major trading partners, translating Taiwan's energy transition achievements into international market value.
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