Taipei: President Lai Ching-te has cautioned the Legislature about the critical importance of approving a trade agreement with the United States. He warned that failure to finalize the agreement could lead to the U.S. imposing tariffs of 25 percent or higher on Taiwanese goods.

According to Focus Taiwan, the tentative deal, which emerged from comprehensive negotiations and investments by Taiwanese companies, involves a reduction of U.S. tariffs on Taiwanese goods from 20 percent to 15 percent. In exchange, Taiwan has pledged up to US$250 billion in direct investments in the U.S., along with US$250 billion in credit guarantees for other companies investing in the U.S.

Vice Premier Cheng Li-chiun, who led the negotiation efforts, stated that the agreement would provide favorable treatment for Taiwan’s semiconductors and other products under Section 232 of the U.S. Trade Expansion Act. However, the final tariff rates and quotas are still under discussion. The agreement requires approval from the opposition-controlled Legislature in Taiwan, a process that could be affected by an impending U.S. Supreme Court decision on the tariff authority.

President Lai emphasized the urgency of the Legislature’s approval to avoid a scenario similar to South Korea, where U.S. tariffs might be raised due to unmet trade deals. He highlighted the positive reactions from Taiwanese businesses and the stock market, contrasting with the concerns in South Korea over potential U.S. tariff hikes.

In addition to trade matters, President Lai called for the approval of a significant NT$1.25 trillion special defense budget. He criticized an alternative proposal by the Taiwan People’s Party (TPP) to reduce the budget to NT$400 billion, arguing it would compromise the T-Dome air defense system’s integrity.

The passage of the special defense budget is crucial as Taiwan’s 2026 budget proposal, which includes NT$950 billion for defense, remains pending in the Legislature. The Kuomintang (KMT) opposition has yet to decide its stance on the proposed defense budget, as confirmed by a KMT lawmaker speaking anonymously to CNA.