Taiwan firms might leave Mexico due to U.S. tariff threats: economist

Freshly picked bananas float in a sorting pool as they are readied for packing and export at a farm in Ciudad Hidalgo, Chiapas state, Mexico, Friday, May 31 2019. If the tariffs threatened by United States President Donald Trump on Thursday were to take effect, Americans may see higher prices in grocery stores. The U.S. imports $12 billion of fresh fruits and vegetables from Mexico. (AP Photo/Marco Ugarte)

TAIPEI (CNA) – A threat by U.S. President Donald Trump to impose punitive tariffs on imports from Mexico may prompt Taiwan manufacturers in the Central American country to withdraw, an economist said on June 1.

For Taiwanese manufacturers, Mexico’s main advantage is its geographical proximity to the U.S. market, which means lower costs, Darson Chiu (邱達生), deputy director of the Taiwan Institute of Economic Research (TIER) Economic Forecasting Center, told CNA in an interview Saturday.

If the U.S. follows through with its tariff threats, however, the cost advantage will disappear, which may lead Taiwanese investors in Mexico to move their production operations, Chiu said.

Last week, Trump said in a tweet that his administration would impose a 5 percent tariff on Mexican imports, starting from June 10, and will slowly increase the rate to 25 percent until the illegal immigration problem is remedied.

The threat, coupled with the ongoing trade war between the U.S. and China, has raised concerns about the effects of escalating global disputes on Taiwan’s exports.

Taiwanese manufacturers in Mexico produce mainly electronics components for the U.S. market.

Among them are Wistron Corp., Pegatron Corp., and Wiwynn Corp., as well as notebook computer ODM services provider Compal Electronics Inc.

Wiwynn, a subsidiary of Wistron, has about 60 percent of its total production in Mexico, manufacturing tech products such as servers, computer storage and accelerator devices, and cloud technology-based gadgets.

Following the U.S.’ threat of tariffs on imports from Mexico, shares of Wiwynn fell 1.22 percent to close at NT$323.00 (US$10.25), off an early low of NT$300.50 on the Taiwan Stock Exchange Monday, where the benchmark weighted index was up 0.02 percent at 10,500.07 points.

Wiwynn said it was holding discussions with its clients on the issue and would put plans in place to deal with the tariff issue.

The tariffs, however, would have other consequences such as higher inflation, which in turn may lead the U.S. Federal Reserve to tighten its monetary policy if the consumer price index climbs from the April figure of 1.98 percent to reach 2 percent, according to Chiu.

Meanwhile, Liu Meng-chun (劉孟俊), head of the First Research Division at the Taipei-based Chung-Hua Institution for Economic Research, said Taiwanese companies had been increasing their investments in Mexico in light of the trade tensions China and the U.S. in recent months.

Unfortunately, Mexico has become part of the global trade disputes, Liu said.

Taiwanese manufacturers in Mexico said they would be paying close attention to the G20 summit at the end of June to see if Mexico would promise to tighten control on immigrants through its territory en route to the U.S. in exchange for Trump’s withdrawal of the tariff plan.

In 2018, Mexican exports to the U.S. totaled US$346.5 billion. ●

By Liao Yu-yang and Frances Huang