Taiwan Urged to Increase U.S. Purchases Amid Currency Watchlist Concerns: Central Bank.

Taipei: Taiwan's Central Bank has recommended that the government boost its purchases from the United States to address potential trade issues, as the country is likely to remain on the U.S. currency watchlist following Donald Trump's inauguration as U.S. president. In a report to the Legislature released recently, the Central Bank warned that Taiwan's growing trade surplus with the U.S. could make its presence on Washington's currency manipulation watchlist a "new normal." According to Focus Taiwan, the Central Bank suggested that to reduce the trade surplus, Taiwan should consider increasing its imports of energy, agricultural products, and military equipment from the U.S., which is among Taiwan's key trading partners. The report highlighted concerns over Trump's trade policies, which could intensify global trade conflicts and technological competition, with tariffs anticipated to cause significant global spillover effects. The Central Bank noted that as global markets brace for Trump's policies, there mi ght be substantial volatility in short-term financial markets. Should the U.S. raise tariffs globally, resulting trade friction could lead to a drastic reorganization of the global supply chain, affecting economic growth and inflation worldwide. This reorganization might also increase operational costs for global companies, thereby driving up inflation. Taiwan must be cautious of the spillover effects from global inflation, as many Taiwanese manufacturers depend on raw material imports, the bank emphasized. The report further warned that Taiwan's exports, private investments, and economic growth are highly vulnerable to global economic shifts. Taiwanese businesses might alter their global strategies amid the supply chain reorganization, potentially affecting Taiwan's export growth momentum and domestic investment willingness, which could adversely impact economic growth. However, the report also noted that if the U.S. imposes greater trade sanctions on China, Taiwan could benefit from orders being redirecte d from China, a scenario observed during Trump's first presidential term from 2017 to 2022. The extent of any potential benefit remains uncertain. The Central Bank maintained that it has consistently engaged in positive communication with the U.S. Treasury Department, and both parties will continue to discuss macroeconomic and currency policy issues. Despite the volatility of U.S. trade policies and their potential impact on Taiwan's financial market, the Central Bank pledged to implement suitable measures to maintain domestic exchange market stability.