trump's tariff plan could shake taiwan's chip industry
Taipei, Wednesday, 29 January 2025.
President Donald Trump has announced plans to impose significant tariffs on semiconductor chips imported from Taiwan, aiming to shift production to the United States. This announcement has raised geopolitical concerns and could impact Taiwan Semiconductor Manufacturing Company (TSMC), a key player in global supply chains. Trump’s proposed tariffs, which could reach up to 100%, are seen as a move to incentivize technology companies to build manufacturing facilities in the U.S. Taiwan officials promptly responded, highlighting the mutual benefits of current U.S.-Taiwan tech collaborations. Despite TSMC’s investments in U.S. manufacturing, most of its production remains in Taiwan. Any new tariffs could disrupt exports and raise costs for North American tech companies, for which Taiwan is a crucial chip supplier. These developments have intensified debates over the future of semiconductor manufacturing and the broader implications for U.S.-Taiwan trade relations.
Trump’s aggressive tariff proposal
Former President Trump declared plans to impose tariffs of up to 100% on Taiwan-manufactured semiconductor chips [1][2]. In a speech to Republican representatives on January 27, 2025, Trump emphasized this measure aims to force chip manufacturers to establish factories in the United States [1]. He explicitly rejected the approach of providing billions in subsidies, as seen in the previous administration’s CHIPS Act [2].
Taiwan’s diplomatic response
Taiwan’s economic ministry quickly responded on January 28, stating that the Taiwan-US semiconductor relationship creates a ‘win-win business model’ for both sides [1][2]. Officials emphasized the complementary nature of Taiwan’s manufacturing expertise and American design capabilities [2]. The ministry indicated it would maintain close communication with the US to ensure continued mutually beneficial industry development [1].
TSMC’s market exposure
Despite TSMC’s $65 billion investment commitment to build three fabs in Arizona [1], the company’s primary manufacturing remains in Taiwan. The North American market is crucial for TSMC, accounting for 70% of its revenue in 2024 [1]. The first Arizona facility is scheduled to begin production in early 2025, with the second plant targeted for 2028 operations [1].
Market impact
The tariff announcement triggered significant market turbulence. On January 27, 2025, NVIDIA experienced its largest single-day market value loss, with tech companies’ total market capitalization dropping by approximately $1 trillion [4]. Industry analysts note that implementing tariffs could lead to price increases for many electronics products dependent on Taiwan’s semiconductor manufacturing [1].