Taiwan and the Trade War

Before you start reading with cynicism, I have tried my best to not express my political views in this post. Instead, the objective of this post is to outline the economic advantages of Taiwan from its controversial political situation. In this post, Taiwan refers to the people and governing authorities in the region of Taiwan around which an economic system is constructed, so the sovereignty of Taiwan, or the Republic of China, is not a question addressed here.

The Trade War between the United States and China had fostered a mutual distrust. Especially in China, where the Communist Party (CPC) has the ability to manipulate information to a great extent. From inquiring Chinese businessmen, I have learned that their refusal to trade with the United States primarily comes from government influence, not the decrease in profit from tariffs. In fact, they themselves seem to hold extreme views of the United States, calling them "mindless pig-heads" and "yankees" (this is apparently an insult). As such, there is not much a demand for products from the United States in China. In fact, even shortages of products from the United States, such as software, are not properly addressed -- the Trade War only increased pirating. Since China is a manufacturing giant, United States suffers more shortage in material products. However, in terms of technology, the two is on equal grounds. Software development in the United States trumps that of China, and in terms of hardware China does not lose. The two nations are competing on a technological market that is separate into two, but desperately trying to communicate to propagate innovation.

What does any of this have to do with Taiwan? Over the weekends, I had the opportunity to talk with a Taiwanese business consultant who has most of his dealings in China's tech sector. While China has a hostile relationship with Taiwan due to political controversies over its sovereignty, many Chinese people are convinced that Taiwan is part of the Chinese territory. As long as the political controversies are not mentioned, Chinese and Taiwanese businessmen can work together on the premise that they are of the same people. On the other hand, there is little to no tension between the United States and Taiwan. As such, Taiwan has become a medium for communication between the United States and China, especially in the tech industry due to Taiwan's successes in manufacturing semiconductors. (Specifically TSMC, who has several holdings/companies in the United States and China)

What does all this curtail? Taiwan, as a region of people, is not considered to be economically successful. However, an individual who has noticed this trend can effectively capitalize on the inelastic markets of either side. In fact, TSMC saw a dramatic rise in stocks directly after Trump's declaration of the 25% tariff in June. The value of the company is increasing to this date, and is approaching an exponential trend as more and more investors become aware of its advantages. TSMC manufactures chips in China that are in high demand in the United States for a cheap price. The business consultant I was in touch with sells his knowledge of software from the United States, such as artificial intelligence, to conglomerates in China. While nations seem to suffer at a macroeconomic scale in this clash of two economic giants, clever businessmen can benefit from noticing the low elasticity of two separate markets and capitalize on the limited gateway between the two.