Taipei: Taiwanese companies must ramp up their foreign direct investments due to limited land availability in Taiwan and increasing external demand, according to the president of the Taiwan Institute of Economic Research (TIER). Chang Chien-yi made these remarks at a press event in Taipei concerning the January domestic economic forecast, particularly in response to questions about the potential domestic impact of a tentative United States-Taiwan trade agreement.

According to Focus Taiwan, a memorandum of understanding reached during trade talks stipulates that Taiwan's semiconductor and technology firms will invest at least US$250 billion in the U.S. Additionally, a 15 percent levy will be imposed on Taiwanese goods, matching the rate applied to Taiwan's main competitors, including South Korea, Japan, and the European Union. Chang emphasized that, regardless of tariffs, companies are unlikely to invest heavily in Taiwan due to land constraints, citing that a facility like TSMC's would not be feasible in Taipei's Xinyi District.

Chang also refuted claims that the Taiwanese government had pressured companies like TSMC to invest in the U.S. and dismissed concerns that such investments would deplete Taiwan's economy. Despite remarks from U.S. Commerce Secretary Howard Lutnick about relocating 40 percent of Taiwan's semiconductor supply chain to the U.S. by the end of Donald Trump's second presidential term, Chang assured that 75-80 percent of this supply chain is expected to remain in Taiwan by 2030.

TSMC Chairman C.C. Wei was cited by Chang, affirming that TSMC's U.S. investments are primarily driven by customer demand. According to Taiwan's Ministry of Finance, in 2025, 30.9 percent of Taiwan's exports were directed to the U.S., making it Taiwan's largest single export market, surpassing China (including Hong Kong) for the first time.

Chang described the recent tentative U.S. tariff arrangement as a positive development, particularly highlighting the favorable treatment for semiconductors and related products under Section 232 of the U.S. Trade Expansion Act. However, he noted that the formal U.S.-Taiwan trade pact expected soon could be contentious, as it would open Taiwan's market to American goods, including vehicles and agricultural products. This move could benefit consumers but present challenges for some local companies.

Political uncertainty looms as a significant factor, with the Kuomintang and the Taiwan People's Party-the main opposition parties with a legislative majority-expressing skepticism about the agreement and the pending trade pact. Chang warned that if the trade agreement fails to pass the Legislature, the U.S. might reconsider its tariff stance, urging Taiwanese lawmakers to reach a consensus with domestic industries to face future challenges amid a shifting geopolitical landscape.