If the US proceeds with placing duties on chip imports, a suggestion that former US President Donald Trump is allegedly giving careful thought to Taiwan’s economy could be in danger of being disrupted. Since Taiwan’s export economy is based primarily on semiconductors, any additional trade restrictions imposed by the US might have a devastating effect on the island’s industrial core.
Semiconductor Industry: The Core of Taiwan’s Economy
One of the most reputable Taiwan’s economic think tanks, the Chung-Hua Institution for Economic Research (CIER), issued the warning. More than 70% of Taiwan’s exports to the US are semiconductors and other high-tech components, according to CIER, demonstrating the critical role the chip industry plays in the nation’s overall Taiwan’s economy well-being.
According to CIER President Lien Hsien-ming, Taiwan is far more dependent on semiconductors for its industrial and economic growth than other countries. Lien clarified that the possibility of more tariffs poses a significant risk to Taiwan’s export volumes as well as its economic stability and capacity to compete in the global tech market.
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AI Boom Drives Taiwan’s Trade Surplus
The current explosion in artificial intelligence and high-performance computers has greatly helped Taiwan. Taiwan’s economy trade surplus with the United States in 2024 was $73.9 billion, a substantial increase over the $47.8 billion in 2023. This dramatic rise was mostly caused by the need for semiconductors for cloud infrastructure, AI servers, and other next-generation technology.
Chipmakers from Taiwan, especially Taiwan Semiconductor Manufacturing Co. (TSMC), are now vital suppliers to leading American corporations including Apple, NVIDIA, AMD, and Intel. But Washington, which increasingly views trade imbalances and foreign industrial domination as national security issues, has also questioned this achievement.
Trump’s Tariff Plan and Section 232
According to reports, Trump’s team is looking at using the Trade Expansion Act’s Section 232, which gives the US government the authority to restrict imports for national security purposes. In the past, Section 232 has been used to support import duties on steel and aluminium.
In this instance, tariffs on semiconductors and associated ICT items could be applied. Such targeted duties are probably going to cause more harm than the general 20% provisional duty that was previously issued earlier this year on a larger variety of imports, according to CIER Vice President Chen Shin-horng.
Chen thinks that Washington may have more strategic objectives in mind than just economic ones. He made reference to Trump’s efforts to localise manufacturing in important sectors like semiconductors when he stated, “These tariff threats may be a way to pressure foreign companies to shift more production to the United States.”
TSMC Warns of Investment Risk
The largest chip foundry in the world, TSMC, is the company most directly impacted. The business is now making significant investments in the US, especially in Arizona, where it is constructing a number of cutting-edge chip production facilities.
In order to increase its production capacity, TSMC has committed more than $65 billion in US investment and aims to invest an additional $100 billion worldwide. But in a letter to the US Commerce Department in May 2025, TSMC cautioned that those efforts might be derailed by new levies.
According to the business, “new import restrictions could jeopardise current US leadership in the competitive technology industry.” TSMC underlined that rising prices, uncertain trade, and supply chain interruptions might discourage more growth in the US and jeopardise the country’s own aspirations to become self-sufficient in semiconductors.
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Taiwan’s President Responds: “We’re Negotiating”
Lai Ching-te, the recently selected president of Taiwan, has recognised the gravity of the situation. Speaking in public, Lai called the 20% tax “provisional” and said he hoped that further diplomatic talks would result in a better deal.
During a news conference, Lai stated, “We are actively working with US counterparts to ensure that Taiwan’s economy core industries, especially semiconductors, are protected from harmful trade restrictions.” He emphasised that Taiwan is a trustworthy partner and that both countries gain from the island’s chip sector.
Additionally, Lai has sent economic envoys and trade negotiators to Washington to meet with US policymakers face-to-face and urge them to take into account the benefits of free trade and technical collaboration for both parties.
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What’s Next: Commerce Department Report Incoming
The US Department of Commerce currently controls the future of these possible semiconductor tariffs and is anticipated to make the results of a Section 232 probe public in the coming two weeks. The inquiry looks at whether imports of semiconductors are a national security risk to the United States and whether trade law justifies taking action.
Trump may swiftly implement fresh tariffs—possibly during the upcoming fiscal quarter—if the results validate his position. A move like this, according to economists, would disrupt global supply lines and would have unforeseen repercussions for both US and Taiwanese businesses.
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The Global Chip Race: Context Matters
The planned levies are being imposed in the midst of fierce worldwide rivalry in the chip industry. The governments of the US, EU, China, South Korea, and Japan are all making significant investments in local chip manufacturing in an effort to lessen dependency on a small number of powerful companies, especially Taiwan.
Ironically, Taiwan’s power in producing sophisticated chips has turned into both its greatest asset and its biggest weakness. Taiwan is at the centre of power confrontations between big economies as semiconductors gain geopolitical significance.
Trade imbalances are not the only issue Washington is worried about; supply chain resilience during emergencies is another. The US is increasingly concerned about relying too much on one region for advanced chips due of the COVID-19 outbreak and increased tensions in the Taiwan Strait.
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Risks for Taiwan’s Economy
Targeted semiconductor tariffs may have a major economic impact. The intensity and extent of the levies might limit Taiwan’s GDP growth by as much as 1.5% per year, according to analysts, if semiconductor exports to the US are drastically cut.
The thousands of small and medium-sized businesses engaged in chip design, materials, logistics, and testing would also be impacted by such a slowdown, in addition to large manufacturers like TSMC and MediaTek. R&D spending, foreign direct investment, and employment may all suffer.
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Consequences for US Tech Firms
The proposed tariffs may be intended to safeguard US industry, but they may have the unintended consequence of short-term harm to US businesses. The majority mostly depend on Taiwanese chipmakers to provide them with affordable, high-performing chips.
Tech companies in Silicon Valley and elsewhere have already issued warnings that tariffs may result in increased expenses, supply chain disruptions, and shortages of some products. Customers would probably be affected, possibly seeing an increase in the cost of cloud services, laptops, smartphones, and AI chips.
Conclusion
Taiwan’s trade relationship with the United States has reached a critical turning point due to the potential for US semiconductor tariffs. The conclusion will influence not only Taiwan’s economy but also global technology supply networks and US industrial strategy as both parties get ready for high-stakes discussions.
Taiwan is currently treading carefully, highlighting its value as a partner, protecting its economic interests, and holding out hope that diplomacy will win out over protectionism.