Semiconductor tariff to post big challenge to Taiwan: Think tank

Taipei, Aug. 2 (CNA) With U.S. President Donald Trump threatening to impose a tariff on semiconductors, Taiwan is expected to face a big challenge as information and communication technology items account for more than 70 percent of Taipei's exports to Washington, according to the Chung-Hua Institution for Economic Research (CIER).

Speaking with CNA, Lien Hsien-ming (連賢明), president of CIER, said on Friday that compared with other countries, the semiconductor industry carries a heavier weighting for Taiwan in terms of industrial and economic development.

As the United States' sixth largest trade deficit country, Taiwan had a trade surplus of US$73.9 billion with the U.S. in 2024, up from US$47.8 billion in 2023, on strong demand for artificial intelligence servers and semiconductors from American buyers in the booming AI era, Lien said.

"I think Trump really cares about a trade deficit resulting from purchases of high tech gadgets such as semiconductors," Lien added, referring to an investigation into the ICT industry launched in April, with a focus on semiconductors, under Section 232 of the Trade Expansion Act of 1962 for a possible tariff on semiconductor imports.

"As ICT products make up more than 70 percent of Taiwan's exports to the U.S., a tariff on semiconductors could have a bigger impact on Taiwan's economy than the 20 percent blanket tariff the White House announced Thursday," Lien said.

After the 20 percent tariff was announced, down from 32 percent Trump indicated on April 2, President Lai Ching-te (賴清德) said the tariff is provisional and Taiwan will continue to negotiate with the U.S. for a lower levy.

Taiwan's negotiating team will also talk with its American counterpart on the semiconductor issue, Lai added.

Lai's remarks show the government is focused on a possible tariff on semiconductors as such a levy could threaten Taiwan's economy, Lien said. 

‧Taiwan says negotiations with U.S. to lower 20% tariff still ongoing

Echoing Lien, CIER Vice President Chen Shin-horng (陳信宏) said judging from the U.S. negotiating strategy, a tariff on an individual industry, such as semiconductors, will be higher than a blanket levy.

For example, Japan's tariff has been cut from 25 percent to 15 percent but the levy on steel and aluminum has been maintained at 50 percent as Trump seeks to help revive the U.S. "Rust Belt."

As a result, Trump has sought large investments from countries which specialize in certain industries and have financial capability to invest, via a threat originating from Section 232 under the Trade Expansion Act of 1962, Chen said.

The U.S. knows it is unlikely foreign semiconductor or AI server makers will build new facilities anytime soon, but a tariff under the clause could be set at a lower level at the beginning and gradually increased over the next two to three years, he added.

Taiwan Semiconductor Manufacturing Co. (TSMC), which is investing US$65 billion in Arizona and has pledged an additional US$100 billion, has warned Washington that future tariffs on Taiwanese semiconductors could reduce demand for chips and jeopardize its investment plans in the state.

"New import restrictions could jeopardize current U.S. leadership in the competitive technology industry and create uncertainties for many committed semiconductor capital projects in the U.S., including TSMC Arizona's significant investment plan in Phoenix," the chipmaker wrote in a letter to the U.S. Department of Commerce in May.

U.S. Commerce Secretary Howard Lutnick said at the end of July that the U.S. will release the results of the investigation in two weeks before imposing a tariff on semiconductors.