While U.S. import tariffs announced in March seems to have triggered a trade war between two major economies China and U.S., many other nations who have trade relations with both the countries have landed themselves into a fix.
One such country which has import and export relation with both China and U.S. respectively is Taiwan. According to country’s customs data, in 2015 Taiwan imported about 2.8 MnT of steel from China (30% of total imports), 2.6 MnT (33% in total imports) in 2016 and for 2017 it’s around 1.65 MnT (provisional numbers).
While in case of U.S., the country imported about 1.03 MnT of steel from Taiwan in 2017, up by 15% against last year. Also, according to Taiwan’s Steel Ministry, U.S. is the largest buyer for Taiwanese steel products in 2017 and imposition of import tariffs will be a big blow to Taiwan’s steel sector.
Now SteelMint has heard from its market sources that Taiwan is seeking exemptions from U.S. tariffs at the cost of trade relations with China. The country is planning to stop steel imports from China to mark its place in the list of countries exempted from U.S. tariffs and the decision for the same is expected to come out in a month or two.
U.S. has already imposed anti-dumping tariffs on 13 steel products sold by Taiwanese firms including carbon and alloy steel plates and steel concrete reinforcing bars. Now with the import tariffs in place, the cost of Taiwanese products in the U.S. market will rise to new high.
What will happen if this buzz turns into a reality?
If Taiwan completely curbs its steel imports from China, the country will have to either increase its domestic steel production to meet its requirement or will have to look out for alternative sources for import. Taiwan’s second largest source for steel imports is Japan followed by Russia and South Korea. Subsequently, these countries will have an advantage and can increase their exports to Taiwan.
However, striking off China completely from its list of steel imports may require Taiwan to pay a heavy price. This is because in response to this China may also retaliate with the imposition of trade restrictions on Taiwanese imports as it did in the case of U.S. In 2016, Taiwan accounted for 8.8% (USD 139.7 billion) of China’s overall imports and majorly includes electronics and medical equipment.
Alternatively, if China does not impose trade restrictions on Taiwan, the country might have a harder case because it gets much of its raw material from China. Thus, even if Taiwan gets an exemption from U.S., raw materials suppliers in China might raise their prices so that the firms that import for production in Taiwan and then export to the U.S. will be rather heavily impacted if exported to the U.S.
Market analysts are of opinion that if two giant economies U.S. and China do not opt for negotiations the world is likely to get divided into two groups amid the trade war.
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