The Trump administration is intensifying its strategy to diminish reliance on Taiwan for advanced chips, proposing new tariffs, production rules, and diplomatic negotiations to secure a domestic manufacturing revolution in the face of mounting geopolitical pressures.
The Trump administration is intensifying efforts to reclaim semiconductor manufacturing dominance from Taiwan, amid escalating geopolitical and economic tensions. The U.S. Commerce Secretary Howard Lutnick ...
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Lutnick, in an interview with NewsNation, described the semiconductor supply chain as a major strategic vulnerability, especially given Taiwan’s proximity to China—just 80 miles away—and Beijing’s explicit intentions to assert control over the island. He emphasised the need to reduce America’s dependence on Taiwan for critical chips, questioning the feasibility of protecting Taiwan if the U.S. remains reliant on imports transported by air or sea in a crisis. The administration’s goal is to expand U.S. chip manufacturing capacity substantially, with Lutnick noting a historic increase from just 2% domestic production when he took office to an ambitious target of 40%. Achieving this would involve investments exceeding $500 billion and the establishment of a full supply chain on American soil.
This vision aligns with broader Trump administration initiatives to bolster domestic manufacturing, including a potential “1:1 chip production rule” reported by the Wall Street Journal. Under this rule, semiconductor companies would be required to produce in the U.S. as many chips as they import, with failure to meet this ratio potentially incurring tariffs up to 100%. Such measures are intended to incentivise reshoring of manufacturing and limit reliance on foreign supplies.
In addition to production mandates, the administration is considering new tariffs on foreign electronic products based on their chip content. Proposals under discussion could impose tariffs around 25% on such goods, with slightly lower rates for imports from allies like Japan and the European Union. While these policies might encourage companies to establish or expand manufacturing in the U.S., experts have voiced concerns about potential inflationary impacts as increased costs could trickle down to consumers.
Taiwan, meanwhile, is navigating this complex trade environment carefully. The current 20% “reciprocal tariff” rate applies on some Taiwanese exports to the U.S., layered on top of existing Most Favoured Nation (MFN) tariffs and anti-dumping duties. Taiwanese trade officials are actively negotiating with the U.S. to secure more favourable terms, with hopes that a concluding meeting will finalise an improved tariff framework. These discussions are part of a broader effort to maintain Taiwan’s critical role in global semiconductor supply chains while responding to shifting U.S. policies.
The ongoing visits by U.S. officials, such as Agriculture Under Secretary Luke J. Lindberg’s recent trip to Taiwan, further underscore the importance of the bilateral economic relationship beyond semiconductors. These dialogues include agricultural trade and tariff negotiations, reflecting intertwined trade interests.
While Taiwan is naturally reluctant to relinquish its semiconductor industry leadership, seeing it as a vital economic and strategic asset, the U.S. administration argues that a more balanced production footprint would enhance overall supply chain security. Lutnick stressed that this would not weaken the U.S. commitment to Taiwan’s security but instead create a “silicon shield” through tighter supply chain cooperation.
Investment in U.S.-based semiconductor manufacturing has already seen significant milestones, such as Taiwan Semiconductor Manufacturing Company’s (TSMC) expansion of facilities in Arizona. The third fabrication plant, visited by Lutnick earlier this year, represents the largest foreign direct investment in U.S. history and a concrete step toward realising the administration’s vision of bolstered domestic chip production.
On the regulatory front, the Trump administration is also re-evaluating semiconductor grant programmes initiated under the Biden administration’s CHIPS and Science Act, aiming to ensure taxpayer funds yield better returns. Some previously approved “overly generous” grants are under review, with the possibility of cancellations. Despite this, there remains a strong commitment to maintaining a majority share of global AI computing capacity within the U.S., underscoring the strategic importance of semiconductor technology in emerging fields.
In summary, the Trump administration’s semiconductor strategy involves a multifaceted approach: redefining trade rules with Taiwan and other partners, imposing tariffs to encourage domestic production, reviewing grant spending, and fostering massive investments in American manufacturing capacity. These measures reflect the urgent recognition of semiconductor supply chains as critical to national security and economic sovereignty in an increasingly contested international landscape.
Source: Noah Wire Services