US President Donald Trump last week announced plans to impose reciprocal tariffs on eight countries. As Taiwan, a key hub for semiconductor manufacturing, is among them, the policy would significantly affect the country. In response, Minister of Economic Affairs J.W. Kuo (郭智輝) dispatched two officials to the US for negotiations, and Taiwan Semiconductor Manufacturing Co’s (TSMC) board of directors convened its first-ever meeting in the US. Those developments highlight how the US’ unstable trade policies are posing a growing threat to Taiwan.
Can the US truly gain an advantage in chip manufacturing by reversing trade liberalization? Is it realistic to believe that tariffs alone can suppress Taiwan’s semiconductor industry? The answer to those questions remain highly uncertain.
A 2021 Semiconductor Industry Association report showed that the cost of setting up memorychip factories in the US and Japan would be 20 percent to 40 percent higher than in South Korea, Singapore or China. The report attributed that gap primarily to government subsidies, identifying policy as the key driver of cost differences in the industry. Trump firmly believes that the US’ cost disadvantage stems from foreign subsidies, which lower production costs abroad and “steal” US chip manufacturing opportunities.
However, Tufts University associate professor Chris Miller wrote in Chip War that the US’ biggest mistake in semiconductor strategy was overconfidence and underestimating the value of foundries. As a result, when chip manufacturing for smartphones and other key technologies shifted to Asia, US companies such as Intel lost their competitive edge. The decline was not due to insufficient subsidies, but rather a natural consequence of market dynamics.
The US’ renewed focus on semiconductor manufacturing is primarily driven by the challenge posed by China. However, China is not the first country to challenge US dominance. Looking back at the 20th century, US-Japan semiconductor competition followed a similar pattern: Whenever the US felt pressured, discussions on industrial policy emerged. In the 1980s, the US regained its advantage through trade agreements and tariffs.
The core of Trumpism is the revival of US manufacturing. However, since the 1960s, the US had already abandoned semiconductor manufacturing, shifting production to Asian countries with comparative advantages. More recently, as semiconductor production increasingly moved to China, Washington began viewing Beijing’s rise as a technological threat.
To curb China’s rise and reduce reliance on Asian chip production, the US aims to reclaim semiconductor manufacturing. A major challenge is that the local workforce, supply chain and regulatory framework needed for chip production have largely disappeared. That is why the US is offering subsidies and enacting the CHIPS and Science Act, to first attract semiconductor companies back, then rebuild the abandoned infrastructure and expertise.
Yet, given the US’ long departure from manufacturing, rebuilding these capabilities is costly. TSMC chairman C.C. Wei (魏哲家) said the company spent US$35 million to draft 18,000 regulations for its Arizona plant — excluding workforce recruitment and other resources needed to establish semiconductor facilities. The high cost of setting up US fabs contradicts the principles of comparative advantage and free-trade competition.
Moreover, while Trump criticizes Taiwan’s dominance in semiconductor manufacturing and proposes heavy tariffs on Taiwanese chips, that does not necessarily mean production would shift to the US. Instead, companies might relocate to Vietnam or Malaysia.
Major US firms such as Nvidia, Intel and Synopsys are already expanding investments in Vietnam, while Malaysia — home to Texas Instruments and Intel investments — already account for more than 7 percent of global semiconductor output.
Ultimately, regardless of whether it is Trump’s high tariffs or former US president Joe Biden’s “friend-shoring” policy, as long as Washington discourages US firms from investing in China, new investment destinations might not be in the US, but rather Southeast Asia.
In Trump’s second term, his priorities have shifted beyond US-China rivalry toward a unilateral focus on restoring US manufacturing supremacy. As a result, even allies such as Taiwan, Japan and South Korea might find themselves subject to US trade restrictions.
Given the political gridlock in the legislature and potential budget freezes or cuts, Taiwan’s government has limited resources to offer land, utilities and tax incentives to attract semiconductor investment. Taiwanese companies must bolster ties with the US and explore investment opportunities instead of relying solely on government support.
Meanwhile, the government should help reduce the costs of setting up factories through policy coordination, workforce support and cross-agency collaboration. Taiwan’s survival strategy in the “chip war” hinges on maintaining technological leadership, deepening international cooperation and staying aligned with market demands. Only by doing so can Taiwan secure its competitive edge and remain resilient in the evolving semiconductor landscape.
Lin Tzu-yao is from Kaohsiung and a doctoral student in political science at National Taiwan University.
Congratulations to China’s working class — they have officially entered the “Livestock Feed 2.0” era. While others are still researching how to achieve healthy and balanced diets, China has already evolved to the point where it does not matter whether you are actually eating food, as long as you can swallow it. There is no need for cooking, chewing or making decisions — just tear open a package, add some hot water and in a short three minutes you have something that can keep you alive for at least another six hours. This is not science fiction — it is reality.
A foreign colleague of mine asked me recently, “What is a safe distance from potential People’s Liberation Army (PLA) Rocket Force’s (PLARF) Taiwan targets?” This article will answer this question and help people living in Taiwan have a deeper understanding of the threat. Why is it important to understand PLA/PLARF targeting strategy? According to RAND analysis, the PLA’s “systems destruction warfare” focuses on crippling an adversary’s operational system by targeting its networks, especially leadership, command and control (C2) nodes, sensors, and information hubs. Admiral Samuel Paparo, commander of US Indo-Pacific Command, noted in his 15 May 2025 Sedona Forum keynote speech that, as
In a world increasingly defined by unpredictability, two actors stand out as islands of stability: Europe and Taiwan. One, a sprawling union of democracies, but under immense pressure, grappling with a geopolitical reality it was not originally designed for. The other, a vibrant, resilient democracy thriving as a technological global leader, but living under a growing existential threat. In response to rising uncertainties, they are both seeking resilience and learning to better position themselves. It is now time they recognize each other not just as partners of convenience, but as strategic and indispensable lifelines. The US, long seen as the anchor
Chinese Nationalist Party (KMT) Chairman Eric Chu (朱立倫) last week announced that the KMT was launching “Operation Patriot” in response to an unprecedented massive campaign to recall 31 KMT legislators. However, his action has also raised questions and doubts: Are these so-called “patriots” pledging allegiance to the country or to the party? While all KMT-proposed campaigns to recall Democratic Progressive Party (DPP) lawmakers have failed, and a growing number of local KMT chapter personnel have been indicted for allegedly forging petition signatures, media reports said that at least 26 recall motions against KMT legislators have passed the second signature threshold
RSS