A trade war between the US and China has been ongoing for several years now. The recent coronavirus pandemic has only made matters worse, and China has only become more bullish about asserting its territorial claims. This has led to Beijing introducing a law that strips Hong Kong of its special semi-autonomous status and 20 Indian troops being killed in an India-China clash. It is a worrying time for investors and traders everywhere, which is why the US and Taiwan have joined forces to rebuild the international supply chain.
Shifting Global Supply Chains Away From China
Just how much global supply chains rely on China has been starkly revealed this past year. Taiwan, the US, the EU, and Japan have realized the severity of this issue and are looking for cooperation in rebuilding the supply chain. In fact, Taiwan’s Ministry of Foreign Affairs, Ministry of Economic Affairs, Taiwan External Trade Development Council (TAITRA), American Institute in Taiwan (AIT), European Economic and Trade Office, and Japan-Taiwan Exchange Association have already organized a supply chain restructuring forum last September.
Brent Christensen, the director of the American Institute in Taiwan, has stated that reorganizing supply chains was “on top of the list” for the US–Taiwan discourse. This makes sense for two reasons. For one, we should not have all our eggs in the same global supply chain basket. Second, if that basket is China-focused, it raises even more concerns. How many more human rights abuses can democratic nations overlook for the mere sake of trade? What happens if there is a full-blown trade war? Or worse, what if there is an actual war?
The Role of Taiwan in Future Trades
Taiwan’s role in global trade is nothing new. Before China assumed the role as the world’s leading manufacturer, many Western goods were manufactured in and shipped from Taiwan. It simply requires investment to get those networks working again. Taiwan Semiconductor Manufacturing Co.’s announced plans to boost US investment, giving us a glimpse into the future of high-tech supply chains. Furthermore, all of Taiwan’s 5G suppliers agree with the US's wishes to only use “clean” 5G networks to prevent interference from foreign and untrusted governments, giving hope to many that the rest of US-Taiwan talks would be smooth-running as well.
What Does it all Mean?
If you are currently managing a small or medium-sized enterprise (SME) in China, this could be bad news, while it would be the opposite if you are running one in Taiwan. However, Taiwanese councils like TAITRA are working with Japan to help companies that wish to change their partnerships from China to Southeast Asia. Ultimately, it would mean good news for SMEs everywhere else.
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