Importance Score: 75 / 100 🔴
New Tariffs on Taiwan Exports Announced, Semiconductors Spared
Taipei, Taiwan – Taiwan, a critical nexus in the global semiconductor supply chain, awoke Thursday to reports of newly imposed tariffs by the United States on goods from the island, set at 32 percent. Notably, semiconductors were excluded from this initial levy.
Semiconductor Sector Receives Exemption, But Future Uncertainty Remains
The decision to exempt the semiconductor industry from tariffs does not necessarily signal long-term protection for Taiwan or other major chip producers, such as South Korea. The possibility of future tariffs remains for these nations.
Taiwanese firms have invested significantly over decades, building an extensive network of manufacturing facilities essential for the intricate process of creating microchips on silicon wafers.
Chips at the Heart of US-Taiwan Trade Relations
Semiconductors, along with a wide array of electronic devices incorporating them, constitute Taiwan’s primary exports. These products are increasingly central to the geopolitical and trade relationship between Taiwan and the U.S., a dynamic that has become markedly transactional since the Trump administration.
Trump’s Stance on Taiwan’s Semiconductor Dominance
President Trump has previously voiced concerns over Taiwan’s prominent position in semiconductor manufacturing, threatening potential tariffs on the sector. He has also asserted that Taiwan, reliant on U.S. backing against China’s territorial claims, should increase its defense spending.
Taiwan Seeks to Mitigate Tariff Impacts
Taiwanese officials and businesses have been actively working to lessen the potential impact of tariff threats from Washington. President Lai Ching-te indicated last month Taiwan’s interest in procuring natural gas from a long-delayed Alaskan project as a gesture of cooperation.
TSMC’s US Expansion and Commitments
Prior to the tariff announcement, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chip manufacturer, declared a $100 billion investment in U.S. operations, expanding its facilities in Arizona. TSMC’s initial plans for the plant were initiated during Mr. Trump’s first term, with substantial financial support secured during the Biden administration.
Tariffs Announced, TSMC Investment Praised
When unveiling the tariffs on Taiwanese goods on Wednesday, Mr. Trump commended TSMC for its U.S. investments. His administration hopes to encourage further investment from other semiconductor companies, including South Korean giants Samsung and SK Hynix, and Taiwan’s GlobalWafers, all of whom pledged to expand U.S. operations during the Biden administration.
Complexities of Semiconductor Supply Chains and Tariffs
Semiconductors present a complex challenge for tariff implementation due to the intricate and global nature of their supply chain. While Taiwan is a primary manufacturer of advanced chips, many undergo subsequent stages like testing in countries such as Malaysia.
Subsequently, these chips may be integrated into devices like iPhones or AI servers in locations like Mexico or China before reaching global consumers.
Experts Highlight Tariff Challenges in Semiconductor Industry
“Very few semiconductors are directly imported into the United States; the majority are components within final products,” explained Jimmy Goodrich, a senior technology analysis advisor at the RAND Corporation.
Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, emphasized the complexity, stating, “It’s considerably more intricate than simply imposing a tariff on steel.”
Global Nature of Chip Production
Ming-Yen Ho, a nonresident fellow at the Research Institute for Democracy, Society and Emerging Technology in Taipei, pointed out that even chips produced by TSMC in Arizona must leave the U.S. for packaging before reaching American consumers.
“Any chip manufactured in Arizona currently needs to temporarily exit the U.S. before returning,” Mr. Ho stated, highlighting the current realities of the global chip supply chain.
Scope of New Tariffs and Taiwan’s Response
Mr. Trump’s announcement of a 32 percent tariff targets Taiwanese goods exported to the United States, a destination for nearly a quarter of Taiwan’s total exports. Beyond semiconductors, which are exempt, Taiwan’s primary exports include electronic devices and their components. The American Chamber of Commerce in Taiwan stressed Taiwan’s vital role in the U.S. economy and urged closer ties between Washington and Taipei.
Taiwanese Government Condemns Tariffs
The Taiwanese government publicly condemned the tariffs on Thursday, labeling them as unreasonable and unfair. Lee Hui-chih, spokesperson for Taiwan’s cabinet, announced in a statement that the government would formally protest to the Office of the United States Trade Representative.
Impact on Taiwan-US Trade Relations
The Taiwanese government’s statement also noted the recent growth in Taiwan’s exports to the United States, driven by increased demand for Taiwanese electronics and advanced technologies, notably semiconductors. President Lai expressed the Taiwanese government’s broader concerns regarding the global implications of these tariffs.
Analysts Assess Taiwan’s Approach to US Relations
Jason Hsu, a senior fellow at the Hudson Institute and former Taiwanese legislator, suggested that the Taiwanese government had been “overly optimistic” about its relationship with the Trump administration. He commented that it was “somewhat naïve” to expect preferential treatment from Mr. Trump, particularly following the TSMC investment announcement.