Taipei-A truce between the United States and China in their trade war struck during a meeting between U.S. President Donald Trump and Chinese President Xi Jinping on the sidelines of the G20 summit last week is expected to benefit not only Washington, but also Taipei, the Chung-Hua Institution for Economic Research (CIER) said Monday.
Wang Jiann-chyuan (???), vice president of CIER, told reporters that the better-than-expected results reached in the Trump-Xi meeting is expected to help the U.S. economy, the largest in the world, stem downside risks in the second half of this year, and that will create a breather for the global economy, including Taiwan's.
On the sidelines of the G20 summit held during June 28-29 in Osaka, Trump and Xi agreed to suspend a trade tariff escalation against each other's country and continue talks to resolve their trade disputes.
Moreover, the U.S. president announced lifting the ban against Chinese telecom equipment supplier and smartphone brand Huawei Technologies Inc., allowing U.S. tech companies to sell products to the Chinese firm.
Before the meeting over the weekend, the market had anticipated the U.S. economy would start to weaken in early 2020, Wang said.
But the truce is expected to raise Beijing's purchases from Washington, which will likely assuage the impact resulting from downside risks to be suffered by the U.S. economy, Wang added.
The economist said a move for Washington to allow U.S. firms to sell equipment to Huawei will help American enterprises grow in the future, and that is expected to expel earlier worries that China would step up retaliatory measures against Apple Inc. or boycott U.S. products.
In particular, as many Taiwanese major tech companies are in Huawei's supply chain, Taiwan's economy is expected to get a boost from such a favorable development, Wang said.
He was referring to suppliers including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), integrated circuit packaging and testing firm ASE Technology Holding Co., IC designer MediaTek Inc., and smartphone camera lens maker Largan Precision Co.
According to an estimate made by the government-sponsored Institute for Information Industry, Huawei purchased US$12.1 billion worth of tech gadgets from Taiwan in 2018. So Wang said the move to lift the ban against Huawei represents good news for Taiwan.
Wang said Taiwan's government should come up with more measures now to boost domestic demand to offset the impact from a decline in outbound sales caused by uncertainty over global trade.
Before the trade war truce, Wang said, Taiwan had felt the pinch from the global trade friction in recent months with its exports for May falling from a year earlier for the seventh consecutive month.
So far, the government has devoted itself to pushing for building more infrastructure in Taiwan and encouraging Taiwanese firms operating overseas to return home for investments, Wang said.
Wang added the government should offer more incentives to encourage local consumers to spend money to further lift domestic demand.
In May, the Directorate General of Budget, Accounting and Statistics (DGBAS) cut its forecast of Taiwan's 2019 gross domestic product (GDP) growth by 0.08 percentage points to 2.19 percent.
But the DGBAS raised its forecast of Taiwan's real capital formation growth for this year by 0.39 percentage points from an earlier estimate made in February to 5.39 percent, and also upgraded the country's real private investment growth by 0.86 percentage points to 4.48 percent, a six-year high.
Source: Focus Taiwan News Channel