The recent U.S. Supreme Court decision invalidating President Donald Trump's use of the International Emergency Economic Powers Act to impose reciprocal tariffs has prompted calls in Taiwan to renegotiate its newly signed bilateral trade agreement.
However, such a move could backfire disastrously. According to Lien Hsien-ming (連賢明), president of the Chung-Hua Institution for Economic Research, attempting to leverage this legal disruption to secure better terms risks provoking U.S. retaliation and squandering hard-won trade protections.
The Danger of Holding Out
Speaking on a livestream program hosted by Democratic Progressive Party spokesperson Han Ying, Lien cautioned against the political temptation to abandon the current pact. He likened international trade negotiations to dating, warning that holding out for a theoretically perfect deal is a dangerous gamble. "Don't think the next one will be better," Lien said. He argued that a fundamentally sound agreement is more valuable than perfect timing, and Taiwan has already secured a highly favorable position that it should not risk losing.
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The crux of Liens' argument lies in distinguishing between the invalidated IEEPA authority and the intact protections of Section 232 of the Trade Expansion Act. While the Supreme Court struck down the legal basis for Trump's reciprocal tariffs—prompting the immediate invocation of Section 122 of the Trade Act of 1974 to maintain a 15% global levy—Taiwan's most critical exposure involves national security industries like semiconductors.Through commitments involving $250 billion in corporate investment and an equal amount in credit guarantees, Taiwan has secured most-favored-nation treatment under Section 232. This critical provision ensures that Taiwan will automatically benefit from any future concessions the U.S. offers to other nations, a protection entirely unaffected by the Supreme Court ruling.
Risks of Retaliation and Section 301
Overturning the agreement now would expose Taiwan to severe economic vulnerabilities. Lien identified two immediate risks if the government halts or renegotiates the deal. First, breaching a contract that promises large-scale U.S. investment could provoke Washington to levy targeted retaliatory tariffs against specific Taiwanese industries.Second, as the fourth-largest source of the U.S. trade deficit last year, Taiwan is already in a precarious position.Voluntarily tearing up the agreement could easily land Taiwan on the Section 301 investigation list for alleged unfair trade practices, stripping away the 15% tariff ceiling protection currently shielding its exports.
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It is also telling that no other nation has requested renegotiation in the wake of the Supreme Court's ruling. If Taiwan were to challenge the Trump administration now, it would be doing so alone, further complicated by its unique diplomatic constraints that prevent direct dialogue with the U.S. president and the ever-present geopolitical shadow of China. Furthermore, Lien emphasized that the current Section 122 tariffs are merely transitional. Future U.S. trade measures could prove even more draconian. When a nation finds a reliable partner and a viable agreement, it must move decisively rather than hesitate, Lien said, extending his dating analogy.
A Rare Quasi-FTA Opportunity
Ultimately, the current agreement represents a rare and vital opportunity for Taiwan's international trade relations. Constrained geopolitically since joining the World Trade Organization, Taiwan seldom secures major bilateral trade pacts. The existing deal essentially establishes a quasi-free trade agreement with the United States, granting Taiwan's traditional industries the reciprocal tariff advantages necessary to compete equitably with rivals in Japan and South Korea.
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