Mon, Feb 03, 2025 page9

• Tariffs likely to backfire: analysts

  CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’

  • Staff writer, with CNA
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  US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said.

  Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said.

  He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation.

  

  A visitor looks at a screen showing images of semiconductor chips and electronic wafers at the Taiwan Semiconductor Manufacturing Co Museum of Innovation in Hsinchu on Nov. 21 last year.

  Photo: I-Hwa CHENG / AFP

  Trump has claimed that Taiwan took up to 98 percent of the chip production business, which means US companies have no choice but to buy chips from Taiwan, Wu said.

  The US president was likely referring to advanced computer chips, of which more than 90 percent are produced in Taiwan, and firms such as Taiwan Semiconductor Manufacturing Co (台積電) have “an absolute technological advantage and pricing power,” Wu said.

  Speaking at a US House Republican Issues Conference on Monday last week, Trump said his administration would soon place “tariffs on foreign production of computer chips and pharmaceuticals to return production of these essential goods to America.”

  Taiwan has about 98 percent of the chip business, Trump said, adding “we want them to come back ... they needed an incentive, and the incentive is going to be they’re not going to want to pay a 25, 50 or even 100 percent tax.”

  In an article published a day later by the Information Technology and Innovation Foundation, Stephen Ezell, vice president for global innovation policy at the Washington-based think tank, said Trump’s pledged tariff aimed at drawing chip manufacturing back to the US would “backfire.”

  If the US raises tariffs on Taiwanese chips to 100 percent, but imposes smaller tariffs on chips from other countries, Taiwanese companies would move their factories elsewhere and not necessarily to the US, Ezell said.

  The pledged tariff would not drive Taiwanese semiconductor and electronics firms to the US, but would instead “unleash a global, cross-sector tariff war that would boost costs for Americans, hurt American tech firms, and damages relations with a key US ally at a vital time,” he said.

  Chung-Hua Institution for Economic Research (中華經濟研究院) president Lien Hsien-ming (連賢明) warned of an approaching “global tariff war,” saying that Trump’s tariffs could be all-encompassing, given the actions taken against US allies Canada and Mexico.

  Trump’s threat of tariffs on Taiwan’s semiconductor industry would have a more significant impact on mature chip producers than on advanced ones, as the former face a more competitive market and have less pricing power, he said.

  Taiwan should consider allowing the New Taiwan dollar to appreciate and reduce the trade deficit with the US as a way to avoid being hit with high US tariffs, Lien said.

  Taiwan, Canada, Mexico and China are all in the top 10 list of countries with which the US has a trade deficit.
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