U.S. President Donald Trump’s threat to impose tariffs of up to 100 percent on Taiwan’s semiconductor industry has sent shockwaves through the silicon island.
Newsweek reached out to the State Department, Taiwan’s Foreign Ministry, and semiconductor manufacturer TSMC with emailed requests for response.
Why It Matters
A tariff is a tax imposed by governments to protect domestic industries and generate revenue. They cost is not borne by the exporting country, but rather by importers—then typically passed on to consumers.
Taiwan is the linchpin of the global chip supply chains, accounting for some 60 percent of semiconductors and more than 90 percent of the most advanced semiconductors, such as those used to power technologies like artificial intelligence—key to America’s tech competition with China.
What To Know
Trump, a self-described “tariff man,” has pledged to use the duties for everything from reducing deficits to pressuring trade partners like Canada and Mexico to crack down on drug trafficking.
On Tuesday, the president railed against Taiwan’s tech industry, which he has claimed was stolen from the U.S, and vowed “to return production of these essential goods to the United States of America.”
“And we don’t want to give them billions of dollars like this ridiculous program that [former President Joe] Biden has. Give everyone billions of dollars—they already have billions of dollars,” he said, pledging to incentivize Taiwanese chipmakers to foot the bill for their own U.S.-based fabs by introducing tariffs of “25, 50, or even 100 percent.”
He said he would “look at” potential import taxes on other imports including pharmaceuticals and steel.
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, is making a historic $65-billion investment in Arizona, building three semiconductor fabrication plants in what is one of the largest foreign direct investments in U.S. chipmaking history.
The first is set to begin 4-nanometer (nm) chip production early this year, while the second, which will manufacture even more advanced 3nm and 2nm chips, is expected to be completed by next year.
The U.S. awarded the Hsinchu, Taiwan-based firm $6.6 billion in direct funding under the CHIPS and Science Act, signed into law in 2022.
The tariffs would be a blow to TSMC, whose North American customers, predominantly in the U.S., accounted for 70 percent of the company’s total net revenue.
“But if Trump raised tariffs on imported Taiwanese chips to 100 percent, it wouldn’t drive Taiwanese semiconductor and electronics firms to America,” warned the Information Technology and Innovation Foundation.
“Instead, the policy would unleash a global, cross-sector tariff war that would boost costs for Americans, hurt American tech firms, and damages relations with a key U.S. ally at a vital time.”
If Trump disproportionately taxes Taiwanese chip imports, firms could likely just build their factories in other countries. Likewise, lower duties for Chinese exports would only boost orders from the U.S. rival’s own semiconductor manufacturers, the Washington, D.C.-based think tank added.
Trump’s comments followed last week’s shock debut of DeepSeek’s R1, a Chinese open-source chatbot rivaling OpenAI‘s GPT-4o and other U.S. models. Its release raised questions about the effectiveness of Washington’s strict export controls, which aim to block China from accessing advanced chips, citing national security concerns.
“Taiwan and the U.S. semiconductor and other technology industries are highly complementary to each other, especially the US-designed, Taiwan-foundry model, which creates a win-win business model for Taiwan and U.S. industries,” the Taipei’s Ministry of Economic Affairs said in a statement.
Premier Cho Jung-tai said Taiwan would continue to seek international cooperation and assured the island could maintain its position as a tech leader. “In a day or two, we will urgently look at whether we need to make more cooperative plans and future assistance programs for the industrial sector,” Reuters quoted him as saying.
What People Are Saying
Sean King, Asia scholar and vice president of media company King Collective, told Newsweek: “DeepSeek’s ascent—however real or not it may be—shows America can’t do it all on our own when it comes to AI. We need the likes of fellow democracies South Korea, Japan and Taiwan to counter the PRC’s [People’s Republic of China] efforts in this space.
“Whether it’s technology or whatever else, ‘America First’ doesn’t have to mean American allies and partners last. We all have to stick together in the face of a common rival: Beijing. In short, now is not the time for gratuitous technology tariffs on Taiwan and other friendly markets.”
Lev Nachman, political scientist and assistant professor at Taiwan’s National Chengchi University, told Newsweek:
“Perceptions [in Taiwan] of the United States as being a reliable ally have already declined in recent years, and Trump’s comments like this really do very little to help the United States’ image (…)
“Trump is ignorant about the semiconductor history and Taiwan’s role, and how both the United States and Taiwan have benefited from the semiconductor industry being based in Taiwan, and I truly hope that someone in his circle is able to help guide him through a better U.S.-Taiwan relationship during a moment like this.”
What’s Next?
The global importance Taiwan’s chip industry has been called a “silicon shield” for the island, which faces increasing economic and military pressure from neighboring China.
Beijing claims Taiwan as its territory, though the Chinese Communist Party has never ruled there, and President Xi Jinping has not ruled out using military force to achieve unification, which he maintains is inevitable.
The U.S. is the island’s main source of arms and has for decades maintained a policy of “strategic ambiguity” to keep China guessing on whether Washington would come to Taiwan’s defense.
Comments made by Trump in the lead-up to the November 5 election, including his statement that Taipei doesn’t “pay us money for the protection,” have eroded Taiwanese confidence in the U.S.
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