U.S.-Taiwan Trade Explodes 61% as China Imports Plunge: Trump’s OBBBA Triggers Historic Shift

The U.S. Council of Economic Advisers (CEA) has released the  2026 Economic Report of the President, which centers on the policy roadmap and projected outcomes of the One Big Beautiful Bill Act (OBBBA)—the signature fiscal legislation of President Donald Trump's second term.

Passed on July 4, 2025, the OBBBA makes permanent and expands key provisions of the 2017 Tax Cuts and Jobs Act (TCJA). It also incorporates deregulation, tariff measures, and targeted incentives for domestic investment in artificial intelligence (AI), semiconductors, and critical minerals, with the aim of reducing dependence on potentially adversarial nations.

The report details projected impacts on growth, investment, wages, and federal debt, while highlighting shifts in U.S. trade patterns, including deepened ties with Taiwan and reduced reliance on China.

The report highlights both the early outcomes and long-term policy roadmap of the OBBBA—the signature legislation of Trump's second term—encompassing the permanent extension of tax cuts, the pursuit of regulatory reform, and the strengthening of tariff policy, all aimed at stimulating investment and raising real wages.

According to the CEA, these provisions are designed to remove barriers to business formation and expansion while redirecting capital toward domestic production. The report estimates that, over the 10-year budget window, real U.S. GDP will be 2.4% to 2.7% higher than a baseline without the OBBBA—equivalent to an additional 0.2 to 0.3 percentage points in average annual growth.

Real investment is projected to rise 5.2% to 7.7% within ten years. Under the OBBBA, the combined effect of tax policy, deregulation, and AI development is projected to raise average labor productivity by 2.9% over the next 11 years, surpassing the historical average. At the same time, average annual real wages are expected to increase by $4,200 to $7,400 after four years.

Additionally, the legislation establishes a monthly 80-hour work requirement for Medicaid recipients capable of working, and extends SNAP work requirements to adults under the age of 64—measures that are expected to affect millions of potential workers.

The CEA further argues that without the OBBBA, expiration of TCJA provisions would have triggered roughly a $4 trillion tax increase over a decade, potentially lowering GDP by about 4% within four years and resulting in the loss of around 6.1 million full-time-equivalent jobs. On the fiscal side, the report projects that combining the tax measures with deregulation and tariff revenues will reduce federal debt as a share of GDP to 94%, compared with a projected 117% under a TCJA-expiration baseline.

The legislative foundation for this economic shift is the OBBBA, which was enacted in July 2025. This act makes the 2017 Tax Cuts and Jobs Act permanent. It also dramatically expands capital investment incentives for domestic corporations.

These policies are specifically designed to eliminate barriers to corporate expansion, the report stated. The CEA projects that the investment will increase the level of real GDP by 2.4 to 2.7 percent higher than baseline through the 10-year budget window.

The administration relies on a combination of deregulation and aggressive tariff policies to control the federal deficit. Federal debt is projected to fall to 94 percent of GDP within ten years, policy experts noted. This represents a significant reduction from previous baseline estimates of 117 percent.

The report also heavily critiques Diversity, Equity, and Inclusion (DEI) initiatives. Environmental, Social, and Governance (ESG) investing frameworks are characterized as restrictive economic burdens. The CEA criticizes DEI and ESG investing for creating economic burdens and calls for a return to an "America First" industrial model.

A central theme of the report is using tax policy, permitting reforms, and the phase-out of certain renewable energy tax credits to channel investment toward cost-effective, reliable energy sources—particularly natural gas and nuclear—to meet surging electricity demand from AI data centers. Incentives also target domestic expansion in semiconductors and critical minerals to reduce dependence on concentrated foreign supply chains.

The report frames these measures as responses to structural risks, including potential disruptions from geopolitically sensitive suppliers and the need to strengthen defense-related industrial capacity. It criticizes past over-reliance on certain imported inputs—particularly Chinese-manufactured solar panels and lithium batteries—as well as earlier policy frameworks such as DEI (diversity, equity, and inclusion) initiatives and ESG-focused investment criteria, arguing that they imposed unnecessary economic costs. Instead, the report advocates an “America First” approach centered on market-driven incentives and national security priorities.

The report specifically highlights cooperation outcomes and investment relationships with the EU, Japan, the UK, Taiwan, South Korea, and India, noting the Agreement on Reciprocal Trade (ART) signed in February 2026 between the United States and Taiwan. This agreement primarily aims to eliminate trade barriers on U.S. agricultural and industrial exports to Taiwan, ensuring a level playing field for U.S. companies in the Taiwanese market.

Data cited in the report show a sharp rise in U.S. imports from Taiwan. Annual imports from Taiwan totaled approximately $129.55 billion in 2024, surging to an estimated $214.89 billion in 2025. For the January–October period, imports increased by approximately $59.6 billion year-over-year—a rise of 61.5% compared with the same period in 2024—marking the largest absolute increase among all U.S. trading partners.

Taiwan ranked first in absolute import value increase, while Switzerland led in percentage growth at 125.3%. This contributed to a widening U.S. goods trade deficit with Taiwan, from $72.95 billion in 2024 to an estimated $145.01 billion in 2025.

The report attributes the surge to several factors: trade diversion away from China amid higher U.S. tariffs on Chinese goods (U.S. imports from China fell 26.7%, or $97.1 billion, in the same period); strategic integration in semiconductors, AI, and related components; inventory buildup ahead of anticipated tariff changes; and broader efforts to enhance supply-chain resilience with trusted partners.

Taiwan has committed to substantial U.S. investment—reportedly at least $250 billion from Taiwanese firms in semiconductors, energy, and AI production, supplemented by $250 billion in Taiwanese government-backed financing and credit support, for a combined scale of around $500 billion. The report presents this cooperation as helping expand U.S. domestic capacity in critical technologies, create high-value jobs, and mitigate supply-chain vulnerabilities.

U.S. exports to Taiwan also rose, from about $56.6 billion in 2024 to an estimated $69.9 billion in 2025. Trade experts note that such shifts reflect both policy incentives and commercial responses to tariff structures and security-driven diversification trends.

The report documents a notable contraction in U.S.-China trade flows. The U.S. goods trade deficit with China stood at $295 billion in 2024; the combined goods-and-services deficit fell from $262.15 billion in 2024 to an estimated $168.11 billion in 2025. U.S. imports from China dropped sharply, reducing China's share of total U.S. imports from 13.4% to 9.3% (approaching pre-WTO accession levels). At the same time, U.S. exports to China declined, falling from approximately$199.27 billion (goods and services combined) in 2024 to an estimated$163.98 billion in 2025.

The CEA identifies five main drivers: tariff-induced trade diversion toward alternative partners (including Taiwan, Vietnam, Mexico, and others); using tariffs as a negotiating lever on issues such as subsidies and market access, while tariff revenues have also contributed to reducing the federal deficit; efforts to reduce economic dependence on a “pacing challenge” in military and technological domains; rebuilding domestic defense-industrial foundations in steel, aluminum, and related sectors; and stricter enforcement against transshipment and origin fraud.

The report links these changes to broader goals of supply-chain diversification, including "reshoring" and "friend-shoring" of critical materials like rare earth elements, where China has held dominant upstream positions. The report further argues that building"Pax Silica" partnerships with allies—ranging from upstream semiconductor equipment manufacturers such as Japan to downstream data center investors such as Qatar—is essential to securing the supply of critical technologies.

It emphasizes the use of tools such as the Defense Production Act and targeted tariffs to enhance transparency and resilience, arguing that concentrated foreign dependencies pose risks to economic security and long-term strategic competitiveness. (Related coverage: Hudson Institute Envoy to KMT: Fix the Arms Bill Before It Derails Cheng's Washington Trip)

Original Article in Chinese


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