HONG KONG- How sturdy is Taiwan’s silicon shield? That’s the question that will keep Taipei on edge as Donald Trump prepares to take office again. Though exports from the $800 billion economy to the United States are surging thanks to chipmaker Taiwan Semiconductor Manufacturing the president-elect’s threatened policies may undermine the trade that has shored up the island’s protection.
For the past five years, Taiwan has faced increased military pressure from Beijing, which views the island as its own territory. Still, the assumption held that the enormous costs of any war in the semiconductor hub ought to deter one. The $860 billion TSMC, for example, makes nearly all of the world’s most advanced chips on the island for Nvidia Apple and others. Any disruption to those factories would have huge repercussions for global GDP and militaries.
Moreover, despite a longstanding US policy of strategic ambiguity towards Taiwan, Taipei counts Washington as its most important ally and arms supplier; outgoing President Joe Biden went further, saying he does not rule out using US military force in the event of a Chinese invasion. The relationship only strengthened on booming demand for chips powering up artificial intelligence. In the nine months to September, Taiwan’s exports to the United States surpassed China’s, hitting $84 billion – a 60 percent surge from the same period a year earlier.
Trump heralds a different approach, accusing the island of stealing America’s semiconductor business, complaining about chipmakers taking subsidies to build factories stateside, and saying Taipei should pay the United States for its defense. He also proposes a blanket 10 percent tariff on US imports from the world. Though Taiwan President Lai Ching-te’s administration on Thursday described bilateral relations as “solid as a rock”, it also warned it couldn’t rule out Beijing in the coming weeks testing Trump’s bottom line on the island by increasing “grey zone” tactics, such as increased patrols of ships and planes that cross the unofficial border.
Much of what happens in Washington is out of Lai’s hands, but there is one thing he can do: increase the outlay on security. The government has budgeted just 2.45 percent of GDP, roughly $20 billion, on defense next year. That’s below the 3 percent target it set itself nearly two decades ago and less than what Washington commits. Silicon shield or not, it’s prudent to spend on a real one.
Taiwanese President Lai Ching-te has not sought to arrange a phone call with Donald Trump after the Republican secured the US presidential election victory, Taiwan’s presidential office said on Nov.7.
A day earlier, his ruling Democratic Progressive Party congratulated Trump and his running mate, JD Vance. “Taiwan and the US share a common belief in the values of democracy, freedom, and human rights, as well as a long-standing mutual interest in maintaining regional stability and promoting economic prosperity,” according to a statement reported by local media.