Taiwan on Alert Over Trump's Semiconductor Tariff Threat

Taiwan faces a serious economic crisis amid concerns that U.S. President Donald Trump may impose tariffs on semiconductors. The Chung-Hua Institution for Economic Research (CIER) forecasts that Taiwan's semiconductor industry—the backbone of its economy—will be directly hit by U.S. tariff policies.

According to CIER, information and communication technology (ICT) products account for more than 70% of Taiwan's exports to the United States, with semiconductors at the core. In 2024, Taiwan's trade surplus with the U.S. reached $73.9 billion (approximately 102 trillion won), up 54% from $47.8 billion the previous year, primarily driven by increased American demand for AI servers and semiconductors.

Targeted Semiconductor Tariffs More Dangerous Than Blanket Tariffs

CIER President Lien Hsien-ming noted, "Compared to other countries, Taiwan has an overwhelmingly high economic dependence on the semiconductor industry," adding that "President Trump views the trade deficit caused by imports of high-tech products like semiconductors very seriously."

In April, the Trump administration launched an investigation targeting ICT products, particularly semiconductors, based on Section 232 of the Trade Expansion Act of 1962. President Lien warned, "Targeted semiconductor tariffs will deliver a bigger shock to Taiwan's economy than the 20% blanket tariff announced by the White House on Thursday."

While the blanket tariff rate was reduced from the 32% Trump initially proposed on April 2 to 20%, industry observers believe tariffs targeting specific industries could be set much higher than blanket tariffs.

Taiwan Government Responds with Negotiation Strategy

Taiwan President Lai Ching-te stated that the 20% tariff is provisional and pledged to secure lower rates through continued negotiations with the United States. Taiwan's negotiation team plans to discuss semiconductor issues directly with U.S. counterparts.

President Lien interpreted Lai's remarks as showing "the government recognizes the possibility of semiconductor tariffs as a real threat to Taiwan's economy."

CIER Vice President Chen Hsin-hung projected, "Looking at the current U.S. negotiation tactics, tariffs targeting specific industries like semiconductors are likely to be imposed at higher levels than general blanket tariffs."

TSMC Warns of Impact on U.S. Investment Strategy

Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest foundry, has already invested $65 billion (approximately 90 trillion won) in Arizona and committed to an additional $100 billion (approximately 138 trillion won) in investment.

In a May letter to the U.S. Department of Commerce, TSMC warned, "New import restrictions on Taiwan-made semiconductors could significantly dampen demand and collapse our investment strategy," adding that it "would create uncertainty for semiconductor capital projects in the United States, including TSMC Arizona's massive investment plans in Phoenix."

Phased Tariff Increase Scenario

Vice President Chen analyzed that Trump is using Section 232 as a strategic tool to pressure foreign companies to invest in the U.S. He noted, "The U.S. government knows that foreign chip manufacturers cannot build new production facilities in the U.S. in a short time, but tariffs could be introduced in phases."

"Section 232 tariffs could start at low levels and increase gradually over the next 2-3 years."

U.S. Commerce Secretary Howard Lutnick stated that results from the ongoing investigation would be announced within two weeks by late July.

[AI Analysis] Accelerating Global Semiconductor Supply Chain Restructuring

The Trump administration's push for semiconductor tariffs represents more than just trade policy—it signals a structural restructuring of the global semiconductor supply chain.

First, the U.S. strategic intent to reduce dependence on Taiwan-concentrated semiconductor production is clear. Maintaining tariff pressure despite TSMC's massive U.S. investments suggests a goal of more rapidly increasing semiconductor self-sufficiency in America.

Second, Taiwan is likely to face a dilemma between economic damage and security cooperation with the U.S. during negotiations. With 70% of ICT exports destined for America, tariff imposition could directly impact Taiwan's GDP.

Third, other semiconductor powerhouses like South Korea's Samsung Electronics and SK Hynix may face similar pressure. If the U.S. expands semiconductor tariff policy starting with Taiwan, pressure on global semiconductor companies to invest domestically is expected to intensify.

Fourth, in the short term, this could lead to semiconductor price increases and higher AI infrastructure construction costs. If U.S. companies must use domestically produced products instead of Taiwan-made chips, increased production costs will likely be reflected in final consumer prices.

Ahead of the U.S. Department of Commerce's investigation results, the negotiation strategies of Taiwan's government and TSMC will be crucial variables determining the future landscape of the global semiconductor industry.