With the US presidential election on the horizon, Republican Donald Trump and Democrat Kamala Harris have drawn attention for their stances on Taiwan's semiconductor industry. Interest surged following Trump's controversial July 2024 interview, where he accused Taiwan of "taking away" US chip business and suggested Taiwan would need to pay for US protection.
Trump's remarks have sparked speculation that he may push for protection fees from Taiwan if re-elected.
Did Taiwan fail to pay protection fees?
On October 25, Trump reiterated this narrative during a podcast appearance, doubling down on his accusations that Taiwan stole the chip industry under the US. He stated that upon his return to office, he would impose tariffs on Taiwanese chips, despite over 90% of advanced chips globally being supplied by TSMC. Trump remarked, "We put up billions of dollars for rich companies to come in and borrow the money and build chip companies here."
However, Trump's perspective contrasts somewhat with that of his vice-presidential running mate JD Vance, who believes that Taiwan's semiconductor industry is crucial to US national interests, even more so than Ukraine. If Vance recognizes this importance, why would there be a need to charge Taiwan protection fees or impose tariffs on Taiwanese chips?
From an international relations perspective, TSMC's investment in advanced manufacturing facilities in the US aligns with US demands and symbolizes Taiwan's commitment as a key ally. Additionally, TSMC's willingness to invest in the US involves higher costs, such as increased labor expenses—an additional financial burden that could be interpreted as a form of "protection fee."
Some analysts believe Trump's critique of the Biden administration's CHIPS and Science Act could be a strategy to distinguish himself from Biden or to create leverage for potential negotiations. The CHIPS Act's successful implementation under Biden is closely tied to Trump's trade policies against China, which initially laid the groundwork.
CHIPS Act's roots: Trump's US-Sino trade war
Market analysis indicates that Trump's administration set the stage for the CHIPS Act, which was later passed during Biden's term. Analysts at Moor Insights & Strategy suggest Trump's ongoing critique of TSMC may be intended to prompt greater US investment from the company and possibly advance a "CHIPS Act 2.0."
Incentives like the CHIPS Act are broadly seen as more advantageous for building U.S. chip manufacturing than blanket tariffs. Tariffs alone don't stimulate domestic production and instead burden consumers and worsen the trade imbalance. Taxing all chips made in Taiwan, for example, would drive up prices for nearly every US electronic product, many of which are already tariffed.
If tariffs expand under the next administration, final costs for US consumers and businesses will only increase. As China's domestic chip production scales up, tariffs on Taiwanese chips could make U.S. products significantly more expensive than those from other regions.
The Semiconductor Industry Association (SIA) notes that CHIPS Act subsidies, loans, and tax incentives—totaling over US$30 billion—have notably spurred private investment in US chip manufacturing. SIA sees these measures as pivotal to strengthening the domestic chip industry.
Uncertainty remains over the next president's chip policies
Harris has endorsed the CHIPS Act, recognizing its value for domestic production and job creation, though she has yet to specify her stance on tariffs or export restrictions affecting chips and electronics. Observers expect she would likely continue most of the Biden administration's trade policies, including restrictions on selling advanced chips, like Nvidia's high-end GPUs, to China.
While Trump and Harris have opposing views on the CHIPS Act, their potential impact on future chip policy remains uncertain. Market analysts find it difficult to predict how either candidate might shape chip and electronics regulations or incentives, noting that the competition between Trump and Harris on these issues remains a pivotal yet uncertain factor.
