Implications of the US-China Trade War for Taiwan*

The ongoing U.S.-China trade war and ensuing high-tech conflicts are regarded as Taiwan's most crucial opportunity to slow down its progressively increasing economic dependence on China. The impact of the U.S.-China trade tensions on Taiwan are important to analyze because of Taiwan's relatively unique political and economic relationships with the United States and China, especially since the latter views Taiwan as its "breakaway province." The regression results indicate that Taiwan's outward investment to China is significantly affected by Taiwan's lagged investment and exports to China, and the gap in the economic growth rates between Taiwan and China. Policy implications are provided for Taiwan to alleviate its economic dependency on the Chinese market and the negative impact from the U.S.-China trade war.