Trump's tax reform faces criticism, may trigger capital flight

2025-05-30 tsmc

taipei, Friday, 30 May 2025.
Donald Trump’s proposed tax law changes, dubbed the ‘one big beautiful bill act,’ are raising alarms about potential capital flight. The bill includes a provision, section 899, that could impose a 20% tax on investors from countries deemed ‘discriminatory’. This move has drawn criticism, including from Elon Musk, and is feared to escalate trade tensions into capital wars. Analysts suggest this could weaken the appeal of US assets, with some investors already diversifying away from the US.

Impact on tsmc stock

The potential repeal of the chips act and the enactment of section 899 of Trump’s ‘one big beautiful bill act’ [4] could significantly impact tsmc (tsm:nyse). Tsmc, a major player in the semiconductor industry, faces uncertainty due to these proposed policy shifts [1]. Analysts fear capital flight from taiwan, potentially affecting tsmc’s manufacturing capacity and market leadership [1]. These legislative actions introduce geopolitical risks that could destabilize tsmc’s stock performance and long-term investments [1][4].

manufacturing capacity concerns

Tsmc’s manufacturing capacity is crucial for the global supply of semiconductors [GPT]. The chips act aimed to incentivize domestic chip production in the us, reducing reliance on asian manufacturers like tsmc [1]. A repeal of this act could lead to decreased investment in tsmc’s taiwan-based facilities, potentially hindering its ability to maintain current production levels [1]. Furthermore, section 899, by targeting ‘discriminatory’ tax policies, adds another layer of complexity, potentially impacting tsmc’s financial operations and strategic decisions [4].

geopolitical risks and market leadership

Geopolitical tensions between the us and china, coupled with potential trade wars, amplify the risks for tsmc [1][4]. Section 899, which allows the us to impose taxes on countries with ‘discriminatory’ tax policies, could strain international trade relations [4]. This could lead to retaliatory measures, affecting tsmc’s global market access and potentially benefiting competitors [1]. The us international trade court has already blocked some of trump’s tariff policies, adding further uncertainty to the trade landscape [2][6]. These factors collectively threaten tsmc’s market leadership and stock stability [1].

expert views and market signals

Market experts are closely monitoring the situation, noting the potential for capital flight and shifts in investor sentiment [1][4]. Deutsche bank analysts suggest that section 899 could escalate trade wars into capital wars, challenging the openness of us capital markets [4]. Concerns are also rising about the impact on us treasury yields, potentially reducing demand for us debt [4]. Some investors are already showing a preference for german bunds, signaling a shift towards safer assets [4]. The senate’s review of the ‘one big beautiful bill act’ will be critical in determining the long-term implications for tsmc and the broader semiconductor industry [4].

Bronnen

chips act capital flight