At the beginning of his second term, around the 2025 Lunar New Year, former U.S. President Donald Trump announced plans to impose tariffs on Taiwan’s semiconductor industry. In anticipation of this policy shift, the Economic Security Unit at DSET had already published a report before the Lunar New Year, interviewing key policymakers in Taiwan and Washington to analyze Trump’s semiconductor policy trajectory. The report was submitted as an op-ed to The Diplomat under the title “Carrots and Sticks? Taiwan and the Semiconductor Supply Chain in the Trump 2.0 Era,” assessing how Taiwanese firms may respond to U.S. semiconductor subsidies and tariff pressures.
DSET overseas researchers of the Economic Security Research Unit, Min-yen Chiang and Ming-yen Ho predicted that Taiwan’s semiconductor manufacturers would face two major uncertainties under Trump’s second term. First, regarding subsidies, the continuation of the CHIPS Act and the Inflation Reduction Act remains uncertain. The Trump administration is also likely to favor domestic U.S. firms in subsidy distribution, putting Taiwanese manufacturers at a disadvantage. Second, Trump prefers using tariffs rather than subsidies to attract foreign investment, which will pressure Taiwanese semiconductor companies—as well as electronics manufacturers like Foxconn, Wistron, and Quanta—to increase their investments in the U.S.
In analyzing the impact of Trump’s tariffs on Taiwan’s semiconductor industry, the researchers noted that TSMC, given its dominant position in advanced process chips and advanced packaging, has the leverage to pass most additional costs onto U.S. customers. However, this pricing power does not extend across the entire supply chain. For example, tariffs on imported AI servers could benefit U.S.-based OEM manufacturers such as Dell and HP, accelerating Taiwanese firms’ shift toward U.S. investment.
The researchers argue that compared to domestic U.S. firms like Intel, Taiwanese manufacturers lack sufficient lobbying influence in Washington. They recommend that Taiwanese firms strengthen their lobbying efforts, following TSMC’s lead. Smaller Taiwanese companies could leverage government support to form trade associations that provide legal consultation, dispute resolution, and policy advocacy while engaging in collective lobbying efforts in Washington. By emphasizing the complementary nature of the U.S.-Taiwan semiconductor relationship, they can maximize their strategic interests. Additionally, given that the Republican Party and Trump favor tax cuts over subsidies, Taiwanese firms should advocate for tax policies tied to construction, production, and employment milestones, ensuring fairer conditions for foreign investors.
At the conclusion of the article, the authors caution the Trump administration against excessive protectionist policies that overly favor domestic firms through subsidies, as this could lead companies to prioritize lobbying over innovation—ultimately harming U.S. interests. Moreover, while the Trump administration may seek to push more Taiwanese advanced semiconductor manufacturing to the U.S. through tariffs, the actual effect would largely be increased costs for American customers. Considering the high costs and long timelines associated with building semiconductor fabs in the U.S., keeping advanced process R&D and manufacturing in Taiwan may better support U.S. technological competitiveness against China.
Despite these challenges, the authors stress that Taiwanese investment in the U.S. remains a significant historical opportunity. By expanding U.S. investments and strengthening lobbying efforts in Washington, Taiwanese firms can deepen U.S. interests in Taiwan’s security and enhance Taiwan’s influence in American public discourse. Moving forward, engaging with and lobbying key figures in the Trump administration—including Silicon Valley leaders and Republican China hawks—will be a critical priority.