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Escalating tensions between China and Taiwan over U.S. House Speaker Nancy Pelosi’s recent visit may not be in the best interest of the island nation, as Taiwan’s trade with mainland China is far higher than that with the United States.
Taiwan’s trade with mainland China and Hong Kong accounted for the country’s 42% of exports in 2021, while the country’s exports to the U.S. comprised only 15% of the total. Official Taiwan data made available by Wind Information revealed that roughly 22% of imports to Taiwan were from mainland China and Hong Kong compared to 10% from the U.S. Taiwan’s total trade with the U.S. ranks far behind China, Japan, Europe and Southeast Asia.
Overall, Taiwan’s exports to mainland China and Hong Kong were worth $188.91 bn in 2021. According to the Taiwanese Ministry of Finance, the exports to its neighbouring country comprised more than 50% of electronic parts, followed by optical equipment.
Similarly, Taiwan exported more goods to Southeast Asia than to the U.S. According to official data, Taiwan exported goods worth $70.25 bn to other countries in Southeast Asia compared to goods worth $65.7 bn to the U.S.
Taiwan is more reliant on China for trade than on the U.S., even though Pelosi heavily backed Taiwan during her high-profile visit to the island nation last week. Pelosi’s visit came notwithstanding China’s warnings that it owns the territory and Taiwan does not have any right to have its own foreign relations.
Several prominent Taiwanese businesses in the high-tech sector, for instance, the largest chipmaker in the world – Taiwan Semiconductor Manufacturing Company (TSMC) – also operate their factories in mainland China.
Taiwan trade with China rising
It is interesting to note that despite mounting tension with China, Taiwan’s imports from the neighbouring country have been ever-increasing. The same is true for China which bought an increasing number of products from Taiwan in recent years.
Between 2016 and 2021, Taiwan imported 87% more goods from mainland China. Compared to this, its imports from the U.S. witnessed a growth of 44%. Taiwan’s exports to mainland China also grew by 71%, while its exports to the U.S. increased by 97%.
Data available from the U.S. government reveals that the country’s top imports from Taiwan include electrical machinery, plastics, iron and steel products and vehicles.
Many global companies based in Taiwan, for instance, Apple supplier Foxconn, also have factories in mainland China.
Meanwhile, a U.S. Congressional Research Service document shows that businesses in Taiwan received export orders worth $200.1 bn in 2021.
US-Taiwan economic ties
According to the U.S. Congressional Research Service, the U.S. goods trade deficit with Taiwan was $30.2 bn in 2020, a 31.2% increase ($7.2 bn) over 2019. At the same time, the U.S. has a services trade surplus of an estimated $2.6 bn with Taiwan in 2020, down 16.2% from 2019.
U.S. foreign direct investment (FDI) in Taiwan was $31.5 bn in 2020, an 8.8% increase from 2019. Reported U.S. direct investment in Taiwan is led by manufacturing, finance and insurance, and wholesale trade. On the other hand, Taiwan’s FDI in the U.S. was $13.7 bn in 2020, up 13.6% from 2019. Taiwan’s direct investment in the U.S. is led by manufacturing, wholesale trade, and depository institutions.
Sales of services in Taiwan by the majority of U.S.-owned affiliates were $7.8 bn in 2018 (latest data available), while sales of services in the United States by the majority of Taiwanese firms were $9.5 bn.
