Taipei: The Taiwan Association of Machinery Industry (TAMI) has raised concerns over the impact of the United States’ 20 percent baseline tariff on Taiwanese goods, coupled with the appreciating Taiwan dollar, on the nation’s machinery industry.

According to Focus Taiwan, the U.S. commenced the enforcement of reciprocal tariffs on August 7, imposing a provisional 20 percent baseline on Taiwan, which is higher than the 15 percent tariffs applied to Japan and South Korea. This new 20 percent rate, in addition to existing most favored nation (MFN) duties and other trade remedy tariffs, positions Taiwanese machinery products at a significant tariff disadvantage of about 10 percent more than similar products from Japan and South Korea.

The situation is exacerbated by the Taiwan dollar’s sharp appreciation since April, which further widens the effective price gap with Japan and South Korea to approximately 20 percent. TAMI warns that this could severely undermine the competitiveness of Taiwan’s machinery exports. Previously, Taiwanese machinery exports to the U.S. faced an average tariff of about 5 percent, whereas Japanese and Korean products often benefited from zero tariffs.

TAMI highlights that the appreciating Taiwan dollar has a greater impact than the tariffs themselves. Between 2021 to July 31 this year, the Taiwan dollar depreciated only 4.6 percent, while the Japanese yen and Korean won saw declines of 46.2 percent and 28 percent, respectively. This currency dynamic has eroded Taiwan’s traditional price advantage, particularly for machine tool exports, resulting in a drop in orders.

Given the higher U.S. tariff rate for Taiwan compared to its key competitors and the currency’s negative effect on export competitiveness, TAMI urges the government to take action to protect the industry’s global market position.

Despite these challenges, TAMI reported that Taiwan’s machine tool exports in July reached US$2.79 billion, marking a 13.4 percent increase from the previous year and six consecutive months of growth. From January to July, machinery exports totaled US$17.71 billion, an annual growth of 6.5 percent, or NT$558.17 billion, up 5.1 percent in Taiwan dollar terms.

TAMI notes that the Taiwan dollar’s appreciation this year has diminished both the real growth of exports and the actual income of companies. The U.S. and China remain Taiwan’s largest export markets, with shipments to China rising by 3.8 percent year-on-year to US$4.07 billion in the first seven months, and exports to the U.S. increasing by 16.1 percent to US$4.72 billion.