Trump’s Gambit: Will Tariffs Move Chip Manufacturing from Taiwan to the U.S. Before It’s Too Late?
By Phillip Steinberg; Photo Credit: William Potter/Shutterstock
It’s no secret President Trump likes tariffs. He has suggested reverting back to the era when most of the government’s revenue came from tariffs instead of the income tax.[1] There’s no shyness in this White House about putting tariffs on friend and foe alike. Trump began his second term by notably announcing tariffs on Canada, Mexico, and China.[2] Since then tariffs have also been proposed for the European Union.[3] Somewhat hidden under the drama playing out among the NAFTA countries was an imposition of tariffs on a traditional ally, Taiwan, specifically on Taiwanese made semiconductors and chips.[4]
Taiwan currently produces 90% of the world’s most advanced chips and 60% of the world’s semiconductors.[5] Experts have long-worried about the impact of the island nation’s precarious political position on the global supply of chips and semiconductors.[6] These worries have only increased in recent years following Russia’s invasion of Ukraine and annexation of territory.[7] Many fear that Taiwan is next as China continues to push for a unification between the mainland and Taiwan.[8] If Taiwan falls to China, their entire computing manufacturing industry would be in the hands of the a geopolitical adversary. The United States and its allies could potentially be choked off from most supplies of crucial computer hardware.[9] Both the Biden and Trump administration fear this possibility and want domestic manufacturing to increase.[10]
In response, there has been a push to move this manufacturing to the United States.[11] Biden, near the end of his presidency, gave a grant to Taiwan Semiconductor Manufacturing Company (TMSC) as an incentive towards building a plant in Arizona.[12] Along with other grants and programs of the Biden administration, the United States could produce up to 30% of the world’s most advanced chips.[13] Trump is continuing to push for domestic manufacturing with tariffs on chips and semiconductors produced in Taiwan while signaling the Biden era grants to manufacturers may be decreased or eliminated entirely.[14] Trump has stated, “They needed an incentive. And the incentive is going to be they’re not going to want to pay at 25, 50 or even 100% tax.”[15] Experts warn that this approach of cutting grants while increasing tariffs can have the opposite of the intended effect of bringing manufacturing to the United States,[16] but shortly after the tariffs on Taiwan were announced, the Taiwanese government pledged to boost investment in the United States.[17]
It remains to be seen if chip and semiconductor manufacturing in the United States can increase to levels high enough and fast enough to prevent catastrophe if China invades and annexes Taiwan.
Phillip Steinberg is a 2L from Dallas, Texas. He attended the University of Texas at Austin for undergrad where he majored in History with a minor in Business. Phillip plans to return to Dallas after law school to work in Corporate Law.
[1] Adam S. Hersh & Joshua Bivens, Tariffs—Everything You Need To Know But Were Afraid To Ask, Econ. Pol’y Inst. (Feb. 10, 2025), https://www.epi.org/publication/tariffs-everything-you-need-to-know-but-were-afraid-to-ask/#:~:text=In%20detail%3A%20President%20Trump%20has,who%20finances%20the%20federal%20government.
[2] Samantha Waldenberg, Kevin Liptak, Alayna Treene, & David Goldman, Trump Announces Significant New Tariffs on Mexico, Canada and China, Sparking Retaliatory Actions, CNN (Feb. 2, 2025, 7:30 AM EST), https://www.cnn.com/2025/02/01/politics/mexico-canada-china-tariffs-trump/index.html.
[3] Philip Blenkinsop, EU Calls Trump Tariffs Unjust, Vows Swift Response, Reuters (Feb. 14, 2025, 9:40 AM CST), https://www.reuters.com/markets/europe/eu-trumps-proposed-reciprocal-trade-policy-is-step-wrong-direction-2025-02-14/.
[4] Taiwan Pledges to Communicate and Invest More in the US After Trump Tariff Threats, Associated Press (Updated Feb. 14, 2025, 1:49 AM CST), https://apnews.com/article/taiwan-president-tariffs-semiconductors-trump-616f3fbdb20b017c2d19bd1c18a570f1.
[5] Isabel Hilton, Taiwan Makes the Majority of the World’s Computer Chips. Now It’s Running Out of Electricity, Wired (Oct. 5, 2024, 2:00 AM) https://www.wired.com/story/taiwan-makes-the-majority-of-the-worlds-computer-chips-now-its-running-out-of-electricity/#:~:text=Today%20Taiwan’s%20science%20parks%20house,Answers%20Computer%20Questions%20From%20Twitter.
[6] David Sacks, Threatening to Destroy TSMC Is Unnecessary and Counterproductive, Council on Foreign Rels.(May 9, 2023, 4:31 PM EST) https://www.cfr.org/blog/threatening-destroy-tsmc-unnecessary-and-counterproductive.
[7] Igor Khrestin, The Russo-Ukrainian War: Implications for Taiwan, Glob. Taiwan Inst. (June 28, 2023) https://globaltaiwan.org/2023/06/taiwanese-perspectives-on-the-russian-invasion-of-ukraine-and-its-implications/.
[8] Id.
[9] See Hilton, supra note 5 (Taiwan accounts for 90% of semiconductor manufacturing and 60% of chip production).
[10] Sarah Parvini, What Changes to the CHIPS Act Could Mean for AI Growth and Consumers, Associated Press (Feb. 16, 2025, 9:40 AM CST), https://apnews.com/article/trump-semiconductors-chips-act-3592f1ed8b8cd4f2145cfa8a4985046c.
[11] Id.
[12] Id.
[13] Id.
[14] Id.
[15] Id.
[16] Parvini, supra note 10.
[17] Kathrin Hille, Taiwan Pledges to Booost US Investment After Donald Trump’s Tariff Threat, Fin. Times (Feb. 14, 2025), https://www.ft.com/content/bdb5381f-786e-404b-9b24-8735bdc95265.