Taiwan Proposes High-Tech Partnership with US Amid Tariff Talks

Taiwan is exploring the possibility of establishing a high-tech strategic partnership with the United States, as Vice Premier Cheng Li-chiun announced during a news conference in Taipei on August 7, 2023. This initiative aims to increase Taiwanese investments in the US and comes amid ongoing discussions regarding tariff rates that currently impose a 20 percent duty on Taiwanese exports to the US.

Cheng, who is leading the negotiations over tariffs, expressed optimism that both nations could reach a consensus on expanding investments in the US through a “Taiwan model.” This approach focuses on enhancing US production capacity without relocating supply chains. Instead, the model promotes investment planning supported by government measures, such as export credit guarantees and joint development of industrial clusters between Taiwan and the US.

In her remarks, Cheng outlined how the proposed model would empower corporate stakeholders to select industries for investment. The Taiwanese government would then align its investments with these choices, facilitating a collaborative environment for growth. To support these initiatives, the government plans to introduce an investment insurance scheme, aimed at providing financial backing and reducing risks for companies.

While acknowledging that Taiwan’s science parks may not be entirely replicable abroad, Cheng confirmed the nation’s willingness to share its expertise to help cultivate industry clusters in the US. This initiative is designed to mitigate investment risks and lower corporate overheads. Cheng clarified that this does not imply relocating Taiwan’s existing science parks to the US. Instead, she emphasized the need for the US government to provide essential infrastructure, including land, utilities, and streamlined legal frameworks, to expedite the establishment of local supply chains.

Cheng highlighted that collaboration among the industrial sector, financial institutions, and government is critical for success. She stated, “A joint effort would create a win for all parties involved.”

In addition to discussions about supply chain cooperation, Taiwan is actively negotiating tariff rates with the US. Cheng reiterated that Taiwan maintains its stance against cumulative tariff rates and is seeking favorable terms for semiconductors and related products under Section 232 of the US Trade Expansion Act of 1962.

The US Department of Commerce and the Office of the US Trade Representative have yet to respond to inquiries regarding these discussions. Notably, TSMC, which is currently investing $165 billion to expand its chip manufacturing capabilities in Arizona, continues to prioritize its production base in Taiwan. Cheng stated that TSMC was not involved in the latest negotiations and rejected a proposal from US Secretary of Commerce Howard Lutnick for a “50-50 split” in chip production, affirming that Taiwan’s aim is to remain rooted in its domestic capabilities while fostering international collaboration.

As negotiations progress, Taiwan is focusing on three primary objectives: reducing the tariff rate, securing comprehensive preferential treatment for semiconductors and other products, and enhancing investment opportunities in the US. The current tariff policy, which took effect on August 7, 2023, has been a significant topic of discussion throughout the five rounds of talks that have occurred this year, beginning with a video conference on April 11.

Taiwan’s proactive approach in these discussions reflects its commitment to enhancing economic ties with the US while ensuring that its strategic interests are safeguarded.