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US Trade Deficit in Microchips Shifts From China to Taiwan

US ties with Taiwan have strengthened and the result shows up in trade balances.
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Taiwan Trade

Taiwan Export Boom

President Biden largely kept intact Trump's tariff policy on China with interesting results on microchips.

Taiwan is now ranked No. 8 in trade with the U.S., just behind the U.K. and ahead of Vietnam.

A Tech Export Boom from Taiwan not only to the US but globally is underway.

Taiwan exported a record $72 billion in goods to the U.S. in the 12 months through September. That is up about 70% since 2017, the year before the Trump administration imposed the Chinese tariffs.

U.S. exports to Taiwan have climbed about 35% from pre-tariff levels to $35 billion annually, also a record, according to U.S. Census Bureau data. The increase has largely been driven by purchases of American crude oil, machinery and cars.

Expanded commerce between Taiwan and the U.S. comes as they move to strengthen their trading ties formally over the objections of Beijing, which considers Taiwan a part of its territory.

Scores of Taiwan-based companies have shifted at least some production back from mainland China to avoid a price increase for their U.S. customers. Taiwan’s government encouraged the trend by offering the returning companies help securing land, financing construction and finding employees.

Since 2019, 243 such returning companies have been approved for relocation assistance on investments totaling more than $30 billion, according to the agency overseeing the program, InvesTaiwan.

Taiwan’s democratically elected President Tsai Ing-wen has actively sought a free-trade deal with the U.S. Earlier this year the Biden administration revived direct negotiations with Taipei, holding the first formal talks in five years.

Total Trade With the US

Total Trade Taiwan

Skirting the Line on One China

The US verbally acknowledges Beijing's "One China Policy", that Taiwan is part of China.

However, the US has not taken an official position on the validity of China's position.

Trade War Status

Balance of Trade in Billions of Dollars 2021-09

On November 4, I noted Goods and Services Trade Deficit Hits a New Record High

Exports, Imports, and Balance

  • September exports were $207.6 billion, $6.4 billion less than August exports.
  • September imports were $288.5 billion, $1.7 billion more than August imports.
  • The September increase in the goods and services deficit reflected an increase in the goods deficit of $8.9 billion to $98.2 billion and an increase in the services surplus of $0.8 billion to $17.2 billion.

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Year-to-Date Numbers

  • Year-to-date, the goods and services deficit increased $158.7 billion, or 33.1 percent, from the same period in 2020.
  • Exports increased $274.1 billion or 17.4 percent.
  • Imports increased $432.8 billion or 21.1 percent. 

"Trade Wars are Good and Easy to Win" 

Trump insisted for years that "Trade wars are good and easy to win." 

They are neither, but Biden has largely kept Trump's tariff policies intact, even upping tariffs of Canadian lumber. 

What Trump accomplished, as I stated in advance, was shifting imbalances. Imports from China morphed into imports from Vietnam and Taiwan. 

There are some benefit as well as risks to a shift of imports from China to elsewhere, but fixing trade deficits certainly isn't one of them.

Biden Doubles Lumber Tariffs

Meanwhile, please note Biden Doubles Lumber Tariffs, Aren't Home Prices High Enough Already?

Biden Joins Trump's Lumber War

Skyrocketing lumber prices in 2020 and early 2021 caused the average price of a new single-family home to increase by nearly $30,000. 

Apparently an additional $30,000 to the price of an average home is OK with president Biden.

Perhaps the tariffs will save a hundred US lumber jobs. Perhaps not because it will likely stall the construction of thousands of new homes by making them even more unaffordable. 

Thanks for Tuning In!

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