Taipei: With U.S. President Donald Trump threatening to impose a tariff on semiconductors, Taiwan is expected to face a significant challenge as information and communication technology items account for more than 70 percent of Taipei’s exports to Washington, according to the Chung-Hua Institution for Economic Research (CIER).

According to Focus Taiwan, Lien Hsien-ming, president of CIER, highlighted that compared to other countries, the semiconductor industry holds a more substantial role in Taiwan’s industrial and economic development. Taiwan had a trade surplus of US$73.9 billion with the U.S. in 2024, up from US$47.8 billion in 2023, driven by strong demand for artificial intelligence servers and semiconductors from American buyers in the booming AI era.

Lien noted that President Trump is particularly concerned about the trade deficit caused by high-tech gadget purchases, such as semiconductors, referencing an investigation into the ICT industry launched in April under Section 232 of the Trade Expansion Act of 1962. This investigation could lead to a possible tariff on semiconductor imports.

“As ICT products make up more than 70 percent of Taiwan’s exports to the U.S., a tariff on semiconductors could have a bigger impact on Taiwan’s economy than the 20 percent blanket tariff the White House announced,” Lien explained.

Following the announcement of the 20 percent tariff, which was reduced from an initial 32 percent proposal, President Lai Ching-te stated that the tariff is provisional. Taiwan intends to continue negotiations with the U.S. to seek a lower levy. The Taiwanese negotiating team will also address the semiconductor issue in discussions with their American counterparts.

CIER Vice President Chen Shin-horng echoed these sentiments, noting that the U.S. negotiating strategy suggests tariffs on individual industries, such as semiconductors, could be higher than a blanket levy. He cited Japan’s tariff reduction from 25 percent to 15 percent, while tariffs on steel and aluminum remain at 50 percent as part of Trump’s efforts to revive the U.S. “Rust Belt.”

Chen added that Trump has sought large investments from specialized industries by leveraging threats under Section 232 of the Trade Expansion Act of 1962. Although it’s unlikely that foreign semiconductor or AI server manufacturers will build new facilities soon, tariffs could initially be set lower and gradually increased over the next two to three years.

Taiwan Semiconductor Manufacturing Co. (TSMC), which is investing US$65 billion in Arizona with a pledge of an additional US$100 billion, has warned Washington that future tariffs on Taiwanese semiconductors could reduce chip demand and jeopardize its investment plans in the state. TSMC expressed concerns that new import restrictions may threaten U.S. leadership in the competitive technology industry and create uncertainties for committed semiconductor capital projects, including TSMC Arizona’s significant investment plan in Phoenix.

U.S. Commerce Secretary Howard Lutnick mentioned that the U.S. will release the investigation results shortly before implementing a tariff on semiconductors.