Taiwan businesses may pay the price in Mexico

In this file photo, taken on June 5, 2019 in Mexico, Workers are working in a production line at the new BMW plant. BMW has opened its first plant in Mexico. More than one billion US dollars were invested in the plant in central Mexico. Up to 175,000 units are to be produced annually on the 300-hectare site. The factory employs 2,500 people. Photo by: Andrea Sosa Cabrios/picture-alliance/dpa/AP Images

TAIPEI (The China Post/ANN) – It’s safe to state that, U.S. President Donald Trump’s tweets are synonymous with the butterfly effect – they can cause shares of numerous manufacturers to plummet in Taiwan’s stock exchange.

The latest example is Trump’s substantial statements regarding a new round of tariffs against Mexico on June 7, which caused a commotion among Taiwanese manufacturers established in the region and raised the possibility of withdrawal.

Most people don’t know but Taiwan is the third largest Asian investor in Mexico and the unpredictable nature of the conflict between the U.S. and Mexico has caused disproportionate effects on the share prices of Taiwanese manufacturers.

Taiwan finds cost advantage by utilizing Mexico’s geographical proximity to save expenses while selling computer parts to their buyers across the border. The implementation of tariffs would completely subdue the cost-effective benefit that Taiwanese manufacturers enjoy.

Taiwan’s free trade agreement with Central American countries – Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua signed an Economic Complementation Agreement with Taiwan on Sept. 13, 1997, and by extension between the Free Trade Agreements signed between these Central American countries and Mexico — allows local companies to sell parts to U.S. buyers without additional tax.

Without such privilege, many manufacturers could reconsider their plans to expand their assembly lines. This provides a safety net for Taiwan as a growing economy and allows them to confidently expand their business with the United States.

In this regard, Taiwan authorities should scrutinize the upcoming G20 Summit to see if Mexico upholds their end of the immigration negotiations to show statistical proof to President Trump.

Mexican authorities barely managed over the weekend to delay what seems to be highly sensationalized tariff threats made by U.S. President Donald Trump by securing a deal to reduce the surge of illegal migration and asylum seekers in the United States.

To counter this, they have deployed 6,000 national guard troops but the future remains grim: Trump’s use of tariffs to gain leverage on issues that aren’t directly tied to trade is poised to continue.

Tariff threats to Mexico were frowned upon globally since they showed promise of rupturing the fragile and critical marketplace. By placing a 5-percent increase on all imports from Mexico, various experts and researchers have concluded that U.S. consumers would be impacted more than their foreign manufacturer counterparts.

The decision would bring harm to both economies since Mexico is the major exporter of many raw materials, parts and finished goods, the impact of tariffs would be absorbed by the buyers of these goods.

Job losses would be the result of such unexpected tariff hikes to countries as far as Taiwan. ●