Taiwan Offers Zero Tariffs to US Amid Trade Tensions

2025-04-07 tsmc

Taipei, Monday, 7 April 2025.
Facing a 32% tariff on its products, Taiwan is attempting to de-escalate trade tensions with the United States. President Lai Ching-te proposed eliminating tariffs as a starting point for negotiations. Taiwan is not planning retaliatory tariffs. Instead, Taiwan is pledging to increase investments by Taiwanese companies in the United States. TSMC, the world’s largest contract chipmaker, has already announced an additional $100 billion investment in the U.S.

TSMC’s Crucial Role

TSMC’s (TSM:NYSE) position as the world’s largest contract chipmaker makes it central to this trade situation [1]. Semiconductors are a major Taiwanese export, though they are currently exempt from the new tariffs [1]. TSMC’s additional $100 billion investment in the U.S. signals a deepening of Taiwan-U.S. industrial cooperation [1]. This investment could help mitigate some of the negative impacts of the tariffs on other sectors [3]. The tariffs highlight the delicate balance TSMC must maintain between its home economy and its growing U.S. presence [2][1].

Impact on Manufacturing Capacity

The proposed tariffs and Taiwan’s response could reshape TSMC’s manufacturing capacity [1]. Increased U.S. investment might lead to expanded production facilities in the United States [3]. This shift could reduce reliance on Taiwan-based manufacturing, potentially impacting Taiwan’s economy [2]. However, TSMC’s commitment to expanding its U.S. presence demonstrates a strategic move to align with U.S. interests and maintain market access [1]. This strategy could offer long-term stability despite immediate tariff concerns [4].

Geopolitical Considerations

Geopolitical tensions between Taiwan and China add complexity to the situation [1]. China views Taiwan as its territory, creating ongoing political and military pressure [1]. The U.S. is Taiwan’s most important international backer and main source of arms [1]. Taiwan’s willingness to negotiate with the U.S. and increase investments can be seen as a move to strengthen ties with Washington [5]. This alignment could provide a buffer against Chinese pressure, but also risks further straining cross-strait relations [6]. These factors create uncertainty for TSMC, which operates in a region of significant geopolitical risk [1][7].

Market Leadership and Stock Implications

The developments have immediate implications for TSMC’s stock [2]. On Monday, April 7, 2025, the Taiwan stock market reacted negatively, dropping by approximately 10% [7]. This drop reflects investor concerns about the potential economic impact of the tariffs [2]. However, the medium- to long-term impact on TSMC’s stock will depend on how effectively Taiwan and the U.S. can negotiate and mitigate the effects of the tariffs [1]. TSMC’s continued market leadership in the semiconductor industry will also play a crucial role in its ability to weather this storm [3].

Taiwan’s Five-Pronged Strategy

President Lai Ching-te has outlined a five-pronged strategy to address the U.S. tariffs [4]. This strategy includes negotiating with the U.S. for improved tariff conditions and providing support for affected industries [6]. It also focuses on medium- and long-term economic development plans, promoting a ‘Taiwan plus one, U.S.’ investment strategy, and engaging in dialogue with industries [4]. Taiwan has already assembled a negotiating team to pursue a ‘zero tariff’ agreement with the U.S., referencing the U.S.-Canada-Mexico trade agreement as a model [5][1].

Domestic Reaction and Concerns

Despite the government’s efforts, the proposed tariffs have sparked criticism within Taiwan [8]. Some view President Lai’s approach as overly conciliatory, with one political figure describing it as a ‘surrender’ to the U.S. [8]. Concerns have also been raised about the potential for the tariffs and increased U.S. investment to ‘hollow out’ Taiwan’s economy [8]. Online, many Taiwanese citizens have expressed skepticism about the effectiveness of the government’s strategies [8]. These domestic concerns add another layer of complexity to TSMC’s operating environment [9].

Bronnen

trade policy foreign investment