Taiwan’s government and businesses should brace for potentially tougher trade hurdles if former US president Donald Trump is re-elected, as he aims to target China and other countries with new or higher tariffs to restore the US economy to its former glory.
Trump remains the front-runner in the US presidential election, although his lead in approval ratings has significantly narrowed after US President Joe Biden dropped his re-election bid and endorsed US Vice President Kamala Harris over the weekend. In a potential showdown between Harris and Trump, they were nearly tied, with 42 percent supporting her and 43 percent supporting him, ABC News reported, citing an Ipsos poll released earlier this month.
Trump believes robust tariffs are a key factor in making the US economy great again, although the idea is not supported by a majority of economists. He might slap new tariffs of anywhere from 60 to 100 percent on China, Bloomberg reported. He also plans to levy a 10 percent across-the-board tariff on imports from other countries, citing a familiar litany of complaints about foreign countries not buying enough US goods, it said.
Taiwan might not benefit from a new US administration under Trump, and could face new tariffs on technology products and other items. Trump claimed that Taiwan “took our chip business from us,” during a recent interview with Bloomberg Business. “They took all of our chip business. They’re immensely wealthy,” he said. Taiwan plays a key role in supplying the world with semiconductors because of how it evolved in the global semiconductor supply chain through pragmatic collaborations. It manufactures chips designed mostly by US semiconductor companies such as Nvidia, Advanced Micro Devices and Apple. Over the past three decades, Taiwan has invested immensely in fostering its semiconductor industry, making it a hub for chip manufacturing, especially as an artificial intelligence (AI) chip production center. Taiwan this year has about a 48 percent share of the world’s foundry market by capacity, but a large portion of that capacity is reserved for leading-edge technologies from Taiwan Semiconductor Manufacturing Co (TSMC), International Data Corp (IDC) said. The figure is expected to drop to 43 percent by 2028, as capacity buildup in other regions such the US, Japan and Southeast Asia would outstrip Taiwan, IDC said.
Asked about how to mitigate geopolitical risks from the US election, TSMC chairman and CEO C.C. Wei (魏哲家) told investors that the company would not “change our original plan of expanding our overseas fabs. We continue to expand in Arizona, Kumamoto and maybe Germany in the future.” TSMC said that normally, if there are import tariffs, its customers would be responsible for it.
However, TSMC did make a major move to redefine the foundry market. Based on its new “Foundry 2.0” plan, the global foundry market would include packaging, testing, mask-making and all integrated device manufacturing firms, excluding memory manufacturers. That would boost the foundry market to US$250 billion last year from US$150 billion, TSMC said. The firm’s market share would drop dramatically to 28 percent from 60 percent. Some analysts consider the action a way to avert potential probes about anti-competitive practices, which some tech giants have faced.
Trump did not provide details about his semiconductor industry policy, but his comments on Taiwan’s chip industry resulted in TSMC’s stock price taking a dive, dragging the TAIEX down. TSMC shares dipped for a fourth consecutive session to NT$939 yesterday. About NT$2.49 trillion in TSMC’s market capitalization has evaporated over the past four trading sessions.
As Trump seeks re-election, his comments might primarily be aimed at voters, but they could cause a stir among the public and affect the US’ policy toward Taiwan, in turn, hampering the development of Taiwan’s semiconductor industry.
Taiwan’s government and companies should be well prepared to face potential trade challenges.
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