Navigating the Storm: Eric Chu Highlights Taiwan's Economic Challenges Amidst U.S. Pressures

The KMT Chairman Sounds the Alarm on Tariffs, Defense Spending, and Currency Concerns, Advocating for Diversification

Taipei, April 9 - The Republic of China (Taiwan) is facing significant economic headwinds, according to Kuomintang (KMT) Chairman Eric Chu (朱立倫). Addressing the KMT's Central Committee, he outlined challenges extending beyond U.S. tariffs, encompassing pressures related to defense spending, currency valuation, and the risks associated with holding substantial U.S. debt.

Chu highlighted that the implementation of U.S. tariffs on trading partners on April 9 marked what he described as "the death knell of global free trade." He expressed concern that the era of globalization is waning, replaced by an increasing trend of protectionism.

Referring to U.S. President Donald Trump's policies, Chu noted the plans to impose tariffs and the demand for increased defense spending from allied nations. Taiwan has been impacted by a 32 percent tariff, despite considerable investments in the U.S. by companies like TSMC, efforts to boost national defense funding, and plans to increase purchases of American goods.

Regarding national defense, Chu pointed to the U.S.'s projected $1 trillion in defense spending in 2025, equaling 3.5 percent of its GDP, and suggested that Taiwan might face pressure to reach similar spending levels.

Further complicating the economic landscape, Chu raised the issue of currency valuation. He stated, "Taiwan will face strong demands [from the U.S.] to allow the Taiwan dollar to rise, which will deal a heavy blow to export-oriented industries," emphasizing the need for the government to be prepared to respond.

Referencing the links: Exports up for 16th straight month in February with U.S. as No. 1 buyer (March 8) and Taiwan becomes 7th largest U.S. trading partner in 2024 (March 9), the article contextualizes the trade dynamics.

Additionally, Chu expressed concern over Taiwan's substantial holdings of U.S. debt, representing 92 percent of the nation's US$577 billion in foreign exchange reserves, questioning its redeemability.

Chu criticized the government's proposed NT$88 billion special budget to mitigate the impact of U.S. tariffs and economic uncertainty, deeming it insufficient. He advocated for a more comprehensive budget, including provisions for industry, labor, and the consumer market, with the KMT proposing a spending of at least NT$200 billion.

Looking ahead, Chu argued that as an export-oriented economy, the Republic of China (Taiwan) needs to diversify its economic strategy, learning from Singapore's example to avoid over-reliance on the United States. He stressed that Taiwan must not neglect any markets to secure its path to prosperity.