Taiwan as an Economic Factor in Sino-American Relations

Taiwan’s economic importance to the United States and China is substantial, albeit not as critical in Sino-American strategic relations as U.S.-PRC economic ties. This is reflected in the size of Taiwan’s economy relative to that of the U.S. and China, as well as the level of trade and investment between the three societies. In terms of the size of their economies in 2017, Taiwan’s GDP (Official Exchange Rate) was USD $572.6 billion; China’s GDP was $12.01 trillion; and the U.S. GDP was $19.49 trillion. Overall, Taiwan’s economy is strong, but its size is less than 5% that of mainland China and less than 3% of the U.S. economy.

In terms of trade, in 2017 China was Taiwan’s number one trading partner ($139 billion, with Taiwan having a $38.9 billion surplus); and the U.S. was Taiwan’s number three trading partner ($67.2 billion with a $6.7 billion surplus for Taiwan). During the same year, China was the number one trading partner of the U.S. in goods and number three in services. Total U.S. trade with China was $710.4 billion, with the U.S. having a $335.4 billion trade deficit. Taiwan’s total trade with both China and the United States was about 30% of the total value of U.S.-China trade. At the same time, Taiwan’s trade with China and the U.S., when compared to Taiwan’s GDP, was about 36% — which reflects the importance of these trading partners to Taiwan’s overall economy.

Accurate investment levels are a bit more difficult to determine. For 2016, U.S. investment in Taiwan was $16.2 billion; in 2017, U.S. investment in China was $107.6 billion. In 2016, Taiwan investment in the U.S. was $7.2 billion; in 2017, Taiwan investment in China was $8.74 billion. For 2017, China’s investment in Taiwan was $265.7 million and China’s investment in the United States was $39.5 billion. Roughly, Taiwan’s investments in the United States and China are about equal, while total U.S. and China investments in Taiwan are about 11% of what the United States and China are investing in each other.

From the point of view of Sino-American strategic relations, the size and importance of U.S.-PRC economic ties are considerably greater than either of the larger countries’ economic ties with Taiwan. Nonetheless, Taiwan is a valuable economic partner with both China and the United States, a value that neither Washington nor Beijing would want to jeopardize under normal conditions. In this respect, the strength of Taiwan’s economy and its close economic ties with both the United States and China are positive factors in helping to maintain stable relations between the United States and China.