As the US presidential election approaches its climax, Taiwan finds itself at a crossroads, caught between intensifying trade confrontations between Washington and Beijing. With both major US political parties aligning against China, Taiwan risks becoming collateral damage in a rapidly escalating trade war, experts warn.

Former National Taiwan University President Kuan Chung-ming, now a chair professor at NTU’s College of Management, cautioned that a new US administration will likely impose "tougher and bolder" trade barriers on China, potentially harming Taiwan's economy due to its close ties with the mainland, as reported by Focus Taiwan (CNA). 

Taiwan’s economic dependency on China—particularly in sectors like semiconductor manufacturing—means it could be severely impacted by any sweeping US tariffs aimed at China. While the US has long been critical of China's trade practices, ranging from intellectual property theft to unfair labour practices, the next president is expected to take an even firmer stance on trade.

Whether it's Donald Trump's blanket 20% tariff proposal or Kamala Harris adopting more targeted measures, the effect on Taiwan could be profound. As Kuan pointed out, Taiwan must prepare a "grand strategy" to avoid being caught in the crossfire of US-China tensions.

Our view is that Taiwan needs to rethink its economic and geopolitical strategy in light of these challenges. While Taiwan’s semiconductor industry has positioned it as a critical player in the global supply chain, it should not rest on its laurels, believing itself to be irreplaceable. The island nation must diversify its industries and markets to safeguard against potential economic retaliation from China or unforeseen consequences of the US-China trade war. Greater diversification would also reduce Taiwan's vulnerability to external economic pressures, ensuring long-term stability for its economy.

Kuan also highlighted the differing approaches between the two US presidential candidates. If Trump were to win, his "American tough guy" persona would likely translate into more direct and heavy-handed trade policies, with an emphasis on economic sanctions aimed at "knocking out" China. By contrast, a Harris administration might take a more nuanced approach, using a variety of "uppercuts, left hooks, and right hooks" in negotiations, but still maintaining a firm stance on China. Regardless of the winner, Kuan emphasised that both sides will likely push Taiwan to increase its defence spending, with the only difference being the manner in which the US would demand these "protection fees."

In this uncertain environment, Taiwan’s policymakers will need to adopt a proactive, adaptive strategy to navigate the storm of US-China trade tensions and secure its economic future.