- [Narrator] If you've got shopping for screws
at Home Depot or Lowe's,
chances are they came from Henry Chen's factory.
- We have been producing this screw
for about approximately 10 years out of our China operation.
- [Narrator] But now, these screws are made in Taiwan.
American demand for goods from the island,
whether it's hardware, toys, or furniture,
has grown a lot in recent years.
Taiwan also controls more than 90% of the world's supply
of the most advanced chips,
which end up in almost everything from electronics to cars.
In 2021, these exports to the U.S. had a record $72 billion,
up about 70% since 2017.
This booming trade between the U.S. and Taiwan comes
as both governments have also strengthened
their military relationship.
And this closeness has angered Beijing.
(speaking in foreign language)
- Companies can get caught in the middle
of different governments,
competing with each other for power and influence.
- [Narrator] So, we visited this factory
to see how geopolitical tensions
have made operating a business in Taiwan trickier.
- So, these screws,
these are typically used on top of roofing,
they're roofing screws.
- [Narrator] Henry Chen, overseas operations at JC Grand,
one of the leading Taiwanese manufacturers
of construction fasteners, since the late 1970s.
Back then, Taiwan was one of the world's
biggest manufacturing hubs alongside Japan and South Korea.
In the 1980s, China started opening up its economy
to the world, including Taiwan.
Which has been separately governed since 1949,
when the Nationalist Party, fled the mainland
after being defeated by communist forces. (people cheering)
So, in hope of reunification,
Beijing welcomed Taiwanese companies to the mainland,
hoping to cool tensions
and make China the world's factory that it is today.
- You see in China there's lower commodity and labor cost.
The cost of China versus Taiwan
for us, just purely on a production level,
it was about five to 10% cheaper.
- JC Grand expanded to China in 2001,
and eventually close to half of its products
were made there,
but that started to change
at the height of the U.S.-China Trade War.
- The United States has just announced tariffs
on another $200 billion in Chinese made goods.
- With the tariff,
it made our China operation so much harder.
- [Narrator] In 2018, the Trump Administration
imposed a hefty 25% levy on many Chinese products,
like Chen's 10 screws.
He said it was one of the first times he realized
how U.S.-China tensions,
could have an immediate financial impact on the business.
So, the company had to make a decision,
stay in China and raise prices or move somewhere else.
- Taiwan has the benefit of just having so much know-how
that's being kept here for the past 40 years.
So, it was primarily a Taiwan-China decision for us.
This is one of the examples of the items
that we shift the production from China to Taiwan.
- [Narrator] Since the tarrifs were first introduced,
Chen's company isn't the only one
that has returned some production back home.
Taipei has convinced more than 250 companies to relocate,
by offering financial incentives and resources.
And this surge in manufacturing capacity
has helped U.S. trade with the island boom.
(speaking in foreign language)
- [Narrator] Shortly after taking office,
President Biden sent a delegation
to meet with the Taiwanese leader.
Who's been actively seeking a free trade deal,
similar to ones the U.S. has with Canada and Mexico.
And the relationship isn't just about commerce,
but also security.
For instance, the U.S. has sent
special forces troops and Marines to Taiwan,
to train soldiers.
- So, you're saying that the United States
would come to Taiwan's defense if China attacked.
- Yes, we have a commitment.
- [Narrator] Commitments like this,
though later hedged by the White House,
have been met with protests from Beijing,
which has told the U.S. to stop interfering.
(speaking in foreign language)
Beijing has also sent warnings to Taipei,
by conducting military drills
about 100 miles from its shores,
while sending spy planes and bombers near the island.
So, as Taiwan builds stronger ties with the U.S.,
it's been moving away from China,
and this dynamic could pull each of them into a conflict.
- The Taiwan issue has been a challenge for a long time.
- [Narrator] Scott Kennedy, is with the
Bipartisan Foreign Policy think tank,
the Center for Strategic and International Studies.
He's been watching U.S.-China relations for over 30 years.
- In the last several years,
Chinese Policy has grown even more antagonistic.
There's been concern about whether or not
China may be preparing to use force
and has given up on its goal
of peacefully resolving the political questions with Taiwan.
- [Narrator] While security experts say
the chances of a war are low,
any missteps by the U.S.,China or Taiwan,
could leave companies that operate on the island
or the mainland, in a vulnerable position.
- The more assortive China has become,
it's a challenge for every company
to try and thread that needle.
- [Narrator] For JC Gran, threading the needle means
running factories in China and Taiwan,
with the wait and see about.
- We see our China operation as being very steady
for the time being,
but there probably won't be too many opportunities
to make major investments,
partially, because of the uncertainties
with the U.S.-China relations.
- [Narrator] The company is also weighing
whether to shift more production to Taiwan,
but that decision comes with other challenges,
given the small islands increasing focus
on manufacturing chips.
- Labor cost is gonna be an issue going forward.
And that's largely gonna be due to
investment in to high tech sectors,
that can eventually drive up the labor costs.
- [Narrator] But Chen says, dealing with that issue
is far more predictable than figuring out
what the World's Superpowers decide to do with Taiwan.
- From our perspective,
we really would like to see steady policies.
No major policy changes, not for China, not for the U.S.
and not for Taiwan.
But, I think there's only so much that we can do about that.
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