Storm Commentary: The Impact on Taiwan of Trump’s New Global Trade Norms

On Aug. 7, Donald Trump’s “reciprocal tariffs” on countries around the world came into immediate effect. This marked the official implementation of the new global trade order under Trump’s rule, which is glaringly disadvantageous to Taiwan. Taiwan must stay alert and move swiftly to prepare its response.

Trump announced the high reciprocal tariffs on most countries on April 2 as part of an effort to pressure governments into offering favorable terms to the United States in exchange for lower tariffs. They faced several delays before finally being implemented, and even as a small number of countries (China, Taiwan and even India) continue to negotiate with the U.S. or see their tariff rates remain subject to change, Trump’s approach and the resulting shift in global trade norms have now become firmly established.

Compared with the China‑focused trade war of his first term, Trump’s latest trade offensive is far more aggressive, this time targeting countries across the globe and marked by several notable tactics and features.

One notable aspect is Trump’s approach of complete and utter unilateralism. He operates entirely outside the frameworks of the past, within which major trade rules and tariff rates were hammered out through multilateral discussions and negotiations among countries. Even what he calls “agreements” with other nations are, in reality, arrangements Washington can dictate and alter unilaterally.

Another key feature is that tariffs and trade negotiations are no longer solely about rates and market access terms. Instead, they have become an all-purpose bargaining tool: Everything from government procurement and investment to defense spending to a rival nation’s judicial system or willingness to enforce U.S. sanctions can now serve as grounds for raising tariffs.

A further element involves the abandonment of free trade and low — even zero — tariffs as the default model and cornerstone of global commerce. At the very least, the world’s largest economy has turned away from them, and it remains uncertain whether others will follow.

Moreover, in the roughly 80 years since the post-war era, the global trading system has upheld the principle of “helping the weak and aiding the needy.” During this time, advanced economies have granted developing countries preferential market access; for example, allowing them to sell goods at lower tariffs into rich markets while retaining higher tariffs on imports from those same advanced economies. That principle, evident in past World Trade Organization negotiations, has now been discarded. Trump, for instance, has imposed tariffs of around 19% on goods from far less developed Southeast Asian nations such as Indonesia, the Philippines and Thailand, while demanding they levy zero tariffs on American products.

Finally, the WTO has become an even more diminished and hollowed-out institution. During Trump’s first term, Washington largely sidelined the WTO and ignored its role altogether, although other countries continued to treat it as relevant and pursued disputes through its mechanisms. Under Joe Biden, the institution was neither revitalized nor openly undermined. Now, its marginalization is expected to deepen.

But in the tariff war presently sweeping across countries worldwide, the WTO has completely lost its role as the global rule-maker and arbiter of trade. Now, it bears a closer resemblance to an economic think tank or even a mere bystander, occasionally commenting on the risks that tariff disputes pose to the global economy but lacking any real influence to address the turmoil. Countries no longer see “appealing to the WTO” as a solution; instead, bending the knee to Washington has become the way to resolve issues. The WTO’s transformation into an “invisible man” is complete, leaving its future bleak and uncertain.

Trump’s trampling over existing trade norms like a bull in a china shop is tantamount to a “reshaping” of the entire international trade framework, though the full extent of the impact remains to be seen. As the world’s largest economy and sole superpower, the U.S. has torn a gaping hole in the long-established global trade system and its rules, to widespread and profound effect. One need only look at how nearly every country in the world has spent the past six months scrambling to respond to Trump’s tariff war.

At this stage, most countries apart from the U.S. are still adhering to the established trade rules and frameworks. Trade among them continues to operate under WTO norms, to the extent possible, and the principles of free trade and low tariffs have not been abandoned. The ongoing creation of regional free-trade organizations testifies to this, and major economies such as the EU, China and Japan continue to stress openness and free trade.

However, if these norms are gradually abandoned — especially if major powers use the resulting vacuum to bully smaller and weaker nations — global trade will enter a total law-of-the-jungle era. Previous norms will no longer apply, just as no previous economic and trade norms apply to Trump.

For most Taiwanese, the tariffs imposed by the U.S. on Taiwan are the primary concern, along with how much Taiwan will be squeezed financially. However, the impact of Trump’s reciprocal tariffs is far more profound, and their long-term effects are even more devastating.

The WTO’s multilateral and free trade rules are extremely important to Taiwan’s exports and overall economy, given the latter’s status as an export-oriented economy with limited diplomatic leverage. Taiwan lacks the protection of numerous free trade agreements and participation in regional economic and trade organizations, so the WTO itself and the duty-free provisions of its Information Technology Agreement remain Taiwan’s best defense. The Section 232* investigations targeting semiconductors, pharmaceuticals and other sectors are the prelude to destroying Taiwan’s International Trade Administration protection, as zero tariffs for these products will no longer be possible.

However, with the WTO marginalized and hollowed out and even the duty-free provisions of the ITA now undermined by Trump, Taiwan’s key protection has been dismantled, significantly increasing the risks for the future. If other countries were to follow suit, it would be highly disadvantageous for Taiwan. This is therefore a point of particular concern and vigilance for Taiwan as it faces up to the new global trade norms under Trump’s rule.

*Editor’s note: Section 232 of the Trade Expansion Act of 1962 allows the U.S. president to adjust imports deemed to pose a threat to national security.