Taiwan Explores High-Tech Partnership with US Amid Tariff Talks

Taiwan is actively pursuing a high-tech strategic partnership with the United States as discussions intensify regarding tariffs and investment opportunities. Vice Premier Cheng Li-chiun announced this initiative during a news conference in Taipei, highlighting Taiwan’s role as a crucial player in the global semiconductor industry, particularly through its leading company, Taiwan Semiconductor Manufacturing Co (TSMC).

The focus of the discussions centers around Taiwan’s desire to reduce the current 20 percent tariff imposed on its exports to the US. Cheng expressed optimism that both nations could reach an agreement to expand Taiwanese investments in the US without necessitating the relocation of supply chains. Instead, the proposed “Taiwan model” aims to enhance and extend US production capacity.

Cheng emphasized that this model involves “industrial investment planning” supported by government measures such as export credit guarantees. Both she and Minister Without Portfolio Yang Jen-ni, alongside Vice Minister of Economic Affairs Ho Chin-tsang, outlined the government’s commitment to fostering US investment through tailored strategies.

The partnership would allow corporate stakeholders to select the industries for investment, leading to government support based on those choices. Cheng mentioned the creation of an investment insurance scheme designed to encourage companies to invest in the US, thereby facilitating the development of local supply chains and industry clusters.

While acknowledging that Taiwan’s successful science parks may not be entirely replicable elsewhere, Cheng assured that Taiwan is willing to share its expertise to help establish similar clusters in the US. She specified that this collaboration does not involve relocating Taiwan’s existing science parks to the US but rather aims to enhance US infrastructure for industrial growth.

To facilitate the creation of these industry clusters, Cheng called for US support in providing essential resources such as land, utilities, and services. She also stressed the importance of expediting visa processes and legal frameworks, which would significantly expedite corporate investment plans.

The ongoing negotiations extend beyond investment strategies, as Taiwan is also addressing tariff rates with US officials. Cheng reiterated Taiwan’s stance that the tariff rates would not be cumulative and highlighted discussions regarding preferential tariffs for semiconductors and products mentioned under Section 232 of the US Trade Expansion Act of 1962.

Despite the urgency surrounding these discussions, neither the US Department of Commerce nor the Office of the US Trade Representative has commented on the ongoing talks. TSMC, which is currently investing $165 billion to establish chip manufacturing facilities in Arizona, will maintain the majority of its production in Taiwan, according to Cheng.

Cheng rejected a proposal reported in the media suggesting a “50-50 split” in chip manufacturing, stating that Taiwan aims to “remain rooted in Taiwan and deploy around the world.” The overarching goal of Taiwan’s negotiations is to secure three primary concessions: a reduction in tariff rates, comprehensive preferential treatment for semiconductors, and improved investment opportunities in the US.

The US tariff policy took effect on August 7, 2022, setting the provisional tariff rate for Taiwanese exports at 20 percent. This current round of discussions is part of a series of five meetings this year, which began with a video conference on April 11, 2023. The ongoing dialogue reflects both nations’ interests in enhancing their economic ties and collaborating on supply chain resilience.