TITLE: Taiwan Rejects US Chip Production Demand Amid Tariff Threats
Taiwan Stands Firm on Semiconductor Manufacturing
Taiwan has firmly rejected demands from the Trump administration to relocate half of its semiconductor manufacturing capacity to the United States, creating significant tensions in global technology supply chains. Vice Premier Cheng Li-chiun confirmed that no such commitment was made during recent trade discussions, despite US claims that Taiwan was considering the move in exchange for security assurances. This rejection comes as the administration threatens comprehensive tariffs on semiconductors and products containing them, potentially disrupting an industry where Taiwan produces approximately 95% of the world’s most advanced chips.
Trade Negotiations and Taiwan’s Position
Taiwanese officials have established clear boundaries in ongoing trade negotiations, explicitly denying US assertions about semiconductor production relocation. “This issue was not discussed in this round of negotiation, and we will not agree to such a condition,” Vice Premier Cheng stated. The discussions instead centered on potential concessions related to the Section 232 investigation that could result in extensive tariffs on semiconductors and related products.
Taiwan’s stance reflects its crucial role in global technology supply chains. The island dominates advanced chip manufacturing, with its exports to the US heavily concentrated in semiconductors. More than 70% of Taiwan’s exports to the United States are semiconductor-related and subject to the ongoing investigation. The Taiwanese cabinet confirmed that negotiations won’t conclude until US plans for “reciprocal tariffs, Section 232 measures and supply chain cooperation” become clear, indicating a prolonged standoff between the two trading partners.
US Tariff Strategy and Industry Concerns
The Trump administration is pursuing an aggressive tariff approach to encourage semiconductor manufacturing relocation to American soil. Since April, the administration has hinted at potential chip tariffs that could reach as high as 100%, while offering exemptions for companies committing to substantial US manufacturing expansion. According to industry sources, the administration is considering imposing tariffs on foreign electronic devices based on the number of chips in each product, with charges equal to a percentage of the estimated chip value.
Technology companies are preparing for what industry experts describe as a potential “triple whammy” of tariffs. Companies face uncertainty about whether they’ll encounter multiple tariffs when importing products containing chips or critical minerals from countries subject to separate tariff measures. Industry representatives note that until semiconductor tariffs are formally announced, it’s impossible for technology companies to make the kind of long-term planning decisions that could help maintain stable consumer pricing.
Complex Exemption System and Supply Chain Effects
The proposed tariff framework includes a sophisticated exemption mechanism requiring companies to maintain a 1:1 ratio between US and foreign semiconductor purchases. Companies would earn credits for each dollar spent on American semiconductors that could offset spending on foreign chips. Any company failing to maintain this balance would face additional tariffs, creating an unprecedented tracking challenge for global manufacturers.
This system would particularly impact companies like Apple, which would need to track every chip in every device to ensure compliance. While an initial grace period would likely be implemented, the policy represents a fundamental transformation in how global supply chains operate. The proposed measures would require manufacturers to completely rethink their sourcing strategies and supply chain management approaches.
This analysis builds upon reporting originally published by IMD Monitor regarding semiconductor trade developments between Taiwan and the United States.
