Lai warns opposition: Approve trade pact or risk higher U.S. tariffs

Taipei, Jan. 28 (CNA) President Lai Ching-te (賴清德) on Tuesday urged the Legislature to approve a trade agreement with the United States that has yet to be finalized, warning that a failure to do so could lead the U.S. to hike tariffs on Taiwanese goods to 25 percent or higher.

In an interview with Taiwan's FTV News channel, Lai said the tentative deal his administration reached with the U.S. followed extensive negotiations and investment commitments by Taiwanese companies.

The terms of the agreement are "very good," Lai said, adding that he hopes the Legislature will approve the finalized version of the deal and not cause Taiwan to go back on its word.

Lai was referring to a tentative agreement with the United States reached in mid-January, under which the U.S. would lower tariffs on Taiwanese goods from 20 percent to 15 percent.

● U.S. lowers tariff on Taiwanese goods to 15% in trade deal (update)

In return, Taiwan committed Taiwanese companies to provide up to US$250 billion in direct investment in the U.S., while the government would provide up to US$250 billion in credit guarantees for other companies investing in the U.S.

According to Vice Premier Cheng Li-chiun (鄭麗君), who led the negotiations, the deal will also grant Taiwan semiconductors and other products the most favorable treatment under Section 232 of the U.S. Trade Expansion Act, though the final tariff rates and quotas have yet to be finalized.

Once a deal is signed, it will need to be approved by Taiwan's opposition-controlled Legislature. Its fate could also be complicated by an upcoming U.S. Supreme Court ruling on Trump's authority to impose tariffs.

Lai warned that if the Legislature delayed approving the agreement, the U.S. could raise its tariffs on Taiwan to 25 percent "or even higher."

Lai was likely hinting at the situation in South Korea, on which U.S. President Donald Trump threatened Monday to raise tariffs from 15 percent to 25 percent, for "not living up to" a trade deal reached last year.

Aside from the positive response of Taiwanese companies and stock market to the deal with the U.S., the current "anxiety" in Korea (at the potential hiking of U.S. tariffs) shows that such an agreement is desirable, Lai said.

Special defense budget

During the interview, Lai also urged the Legislature to approve the NT$1.25 trillion (US$40.02 billion) special defense budget his administration has proposed, while criticizing a competing plan put forward by an opposition party.

He argued that in Taiwan's system of government, the Legislative Yuan is primarily responsible for "oversight," and that lawmakers should respect the professional judgment of the Ministry of National Defense, which proposed the budget.

The special defense budget is "NT$1.25 trillion over eight years, or NT$150-160 billion per year, which the government will use to build the T-Dome -- a smart air defense system -- and advance the defense industry, all of which is interconnected and indispensable," Lai said.

The smaller opposition Taiwan People's Party (TPP), by contrast, has proposed cutting the budget to NT$400 billion, Lai said, warning that this would require giving up purchases that would leave the T-Dome with a "hole" in it.

The passage of either special budget bill would be a significant expenditure for Taiwan, where overall defense spending in the government's 2026 budget proposal, which remains stalled in the Legislature, was around NT$950 billion.

The main opposition Kuomintang (KMT), meanwhile, has not yet decided whether to review the government's special defense budget or propose its own, a KMT lawmaker told CNA on the condition of anonymity.