Why Taiwan’s Advantage in US–China Rivalry Became a Disadvantage in Tariff Calculations

Taiwan’s economy has ranked among the world’s strongest in recent years. The key factor has been US–China rivalry and active US efforts to remove Chinese suppliers from its supply chains, with Taiwan filling the gap, particularly in semiconductors and electronics. Apart from Taiwan’s commanding semiconductor lead and the lack of better alternatives, many information and communications technology (ICT) products and servers shifted almost entirely to production and shipment from Taiwan. This sharply increased exports to the United States and widened Taiwan’s trade surplus. Until yesterday, Taiwanese ICT companies felt confident: US concerns over national security, privacy, and other issues all pointed toward avoiding Chinese ICT products, with most orders moving to Taiwan. Little did they expect US tariffs to be calculated from the trade-deficit ratio. Taiwan’s advantage over recent years became its greatest disadvantage, producing a higher tariff than Japan’s or South Korea’s under the same formula. The greatest pressure, however, falls on other traditional industries. Already less competitive globally, they now face another severe blow from tariffs.