Tariff Forecast on 7 July

Written by Peter Li-Chang Kuo

(Chinese)

Taiwan has long been a strong supporter of the United States. Personally, I have made at least three major contributions to the United States :

In 1966, I helped Apollo reach the space through precision eyelet components.

In 1979, I assisted in realizing Reaganomics by providing satellite receivers.

In 1998, I contributed the TES e-commerce system, which helped the U.S. enter the cross-century digital economy era—laying the groundwork for today’s mega-corporations in Silicon Valley.

As for the positive impacts generated by the “IIA-TES” since 2009, they are even more substantial.

Fig 1: U.S.-Taiwan Cooperation and Division of Labor

Since President Trump returned to the White House on January 20, he has been fully committed to implementing his MAGA agenda. Two major strategies are “Stop Outsourcing” and “Made in America.” He announced plans to impose reciprocal tariffs on April 2 to reduce the U.S. trade deficit.

Treasury Secretary Scott Bessent stated that the Trump administration is especially focused on the top 15 trading partners that both impose high tariffs on the U.S. and maintain large trade volumes—these countries are labeled “The Dirty 15.” According to Reuters, America’s top 15 trading partners include Mexico, Canada, China, Germany, Japan, South Korea, Taiwan, Vietnam, the UK, India, the Netherlands, Ireland, Italy, France, and Brazil—Taiwan ranks 7th. Among the top 10 countries with which the U.S. has the largest trade deficits are China, Mexico, Vietnam, Ireland, Germany, Taiwan, Japan, South Korea, Canada, and India—Taiwan ranks 6th, and all are part of “The Dirty 15.”

Bessent noted that on April 2, President Trump would assign each trade partner a reciprocal tariff rate, based on their own tariff levels, non-tariff barriers, currency manipulation practices, and other factors. However, such tariffs could still be adjusted through negotiation to avoid forming hard tariff walls.

On April 2, President Trump officially announced from the White House a 32% reciprocal tariff on Taiwan, plus a 10% base tariff, sparking widespread discussion. When the market opened on April 7, there were only sell orders, no buy orders—media described the stock market as “a river of blood.”

On April 7, I wrote a letter to President Trump, explaining that Taiwan has always helped America, never stolen from it. Taiwanese small business owners said, “New Zealand’s tariff is only 10%, maybe we should just emigrate there!” Beyond the stock market reaction, an exodus is brewing. In the letter, I listed specific examples of Taiwan’s contributions to the U.S.:

1) In 1966, I helped an American develop precision “eyelet” (known as “Hardome”), helping him win a NASA contract—without charging a penny, indirectly aiding America in the space race.

2) In 1979, I helped Americans develop satellite receivers, laying the foundation for Reaganomics.

3) In 1982, I saved the Barbie brand without ever requesting compensation from Ms. Ruth Handler.

4) From 1986 to 1997, we invented contactless semiconductors. Though the U.S. was absent throughout, American corporations later profited enormously—e.g., Disney, IBM, VISA.

5) In 2006, after observing failed investments in PDAs, I proposed satellite support at the APEC CEO Summit. In 2007, Steve Jobs visited my office in Santa Clara, and I shared with him the concept of a satellite-supported smart communicator, which led to the Apple iPhone, bringing vast value and a still-growing derivative value chain to the U.S.

Given Taiwan’s difficult international position, after the ROC withdrew from the UN in 1971, many talented people fled. In 1972, to help a client transform, I developed ultra-fine wires, deflection yokes, and phenolic insulation boards (which later supported PCB production). In 1974, I founded Cheng Kuang Precision Industrial Co., Ltd. Premier Chiang Ching-Kuo visited and encouraged me to assist the government with “citizen diplomacy,” which led to sister-city ties with San Jose, California. When I later visited Silicon Valley, I met Steve Jobs, then struggling to start up, while I had already been praised by President Chiang as “the father of Taiwan’s precision industry.”

Two years ago, I visited 40 Wall Street to meet you and shared ideas on “Investing in America” (IIA) and building a Technical Education System, which I believe are essential to achieving MAGA. For 40 years, the U.S. followed a logic of “buy from wherever is cheapest,” and lost its practical capabilities. I proposed setting up 1 to 10 Economy Institutes (EI) in each state, where seed consultants would support local MSMEs and help revive a production-based society. As President Reagan once said, “If America is to be strong, its manufacturing must thrive.”

When I interviewed President Lee Teng-hui, he recalled that Chiang Ching-Kuo instructed that Taiwan must upgrade its industries. During Lee’s 12-year administration, TSMC still struggled, but the government supported it unconditionally. We know that Morris Chang left Texas Instruments in 1983, and only after 1984 did IT evolve to give birth to the IBM 5550 PC. Chang did not bring modern advanced chip tech from the U.S.—TSMC’s success came entirely from the love and support of Taiwan’s public and private sectors.

On March 3, TSMC announced in the White House an additional US$100 billion investment, totaling US$165 billion, triggering anxiety in Taiwan—people realized that what Taiwan had spent decades cultivating was not a mountain, not a shield, but a sheep with legs, ready to walk away.

Taiwan has never sought to take advantage of the U.S. On the contrary, we have played a vital role in strengthening U.S. industry, ensuring global supply chain security, and promoting economic prosperity. Recent unfair rhetoric and policies toward Taiwan risk undermining a relationship built on mutual trust, respect, and shared democratic values. I urged you to understand: “Taiwan is not a rival to be punished, but a partner to be cherished.”

On April 2, your announcement of a 32% reciprocal tariff and 10% base tariff struck Taiwan’s already thin-margin industries like a nuclear bomb. The nation felt as though it had returned to 1972. Some are considering emigrating to New Zealand, where the tariff is only 10%—leaving a 22% margin to survive (32% – 10% = 22%).

Mr. President, I must tell you: Taiwan now faces a crisis of exodus and broken supply chains. For 60 years in industry, I have always supported the U.S., even in global forums advocating for “IIA-TES,” because I believe when America thrives, Taiwan prospers too. I saw your email saying, “Peter Li-Chang, I need your advice!” So I must tell you plainly: Taiwan can only bear a reciprocal tariff of 10%, same as New Zealand. This would help avoid the crisis of “exodus and broken supply chains” and enable us to continue providing critical support to America.

Soon after the letter was sent, President Trump responded by lowering the tariff to 10%, with a caveat: “Within 90 days, bilateral negotiations must be held to determine the final tariff rate.” Today is July 7, and the 90-day deadline has arrived.

From the UK’s proactive negotiations with the U.S., securing a 10% reciprocal tariff rate, we can roughly estimate that Japan may be able to secure a 15% rate. As for Taiwan—given that the current administration has had other priorities—if we can manage to negotiate a 20% reciprocal tariff rate, we should be thankful.

During a recent meeting, a small business owner said, “We’ve already prepared for the possibility of facing a 35% tariff on goods exported to the United States.” He expressed that the greatest concern is the appreciation of the New Taiwan Dollar (NTD). While the U.S. dollar remains strong and the Chinese yuan continues to depreciate, the NTD lacks the conditions to appreciate—yet the exchange rate has still risen from NTD 32 to NTD 28.9 per U.S. dollar.

However, I believe that once the tariff rate is finalized, the NTD will likely depreciate back to the levels seen in April.

We’ve gone through difficult times before, such as in 1986 when the Reagan administration pressured the NTD to rapidly appreciate from NTD 40 to NTD 26 per U.S. dollar. Yet through a shared spirit of “you help me, I help you,” we emerged even stronger—culminating in the invention of the TES e-commerce system, which has benefited the world.

Most importantly, national leaders must have a clear and stable policy direction—especially when it comes to exchange rate stability. If this can be achieved, then this so-called tariff drama will ultimately serve as the nourishment that makes Taiwan even stronger.

Peter Li-Chang Kuo, the author created Taiwan's Precision Industry in his early years. Peter was a representative of the APEC CEO Summit and an expert in the third sector. He advocated "anti-corruption (AC)/cashless/e-commerce (E-Com)/ICT/IPR/IIA-TES / Micro-Business (MB)…and etc." to win the international bills and regulations.

【Copyrights reserved by Li-Chang Kuo & K-Horn Science Inc.】

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