As Donald Trump embarks on a historic political comeback, Taiwan braces for what could be a more unpredictable relationship with its most crucial ally, the United States. While Trump’s first term was marked by increased arms sales and enhanced diplomatic ties with Taiwan, his campaign rhetoric this time has been more combative. Trump’s insistence that Taiwan “pays more” for U.S. protection and accusations of Taiwan “stealing” American chip production have sparked anxiety on the island.
Security Concerns
Taiwan’s National Security Council advisor, Professor Chen Ming-chi, notes that many in Taiwan are “anxious” about Trump’s potential second term, especially given his unpredictable nature. One thing seems clear—Taiwan will likely be required to increase its defense spending to maintain American support. This comes at a time when China’s military intimidation tactics are intensifying. Beijing’s actions include near-daily incursions of fighter jets and warships into Taiwan’s air and maritime space, as well as large-scale military drills.
Taiwan’s government maintains that its relationship with the U.S. remains strong. Officials cite established communication channels with Washington that remain consistent regardless of leadership changes. President Lai Ching-te recently emphasized Taiwan’s commitment to being America’s “most reliable partner,” signaling a readiness to maintain close ties regardless of Trump’s return.
However, Trump’s demands could place significant pressure on Taiwan’s government. Unlike South Korea and Japan, Taiwan does not host U.S. troops or pay for their presence. Despite this, the island’s defense budget is already at a record high, accounting for 2.5% of its GDP. Trump’s proposal that Taiwan allocate 10% of its GDP to defense would place it among the world’s top military spenders, far exceeding what most countries contribute. Political resistance could also emerge, as President Lai’s party does not hold a majority in the legislature.
Impact on the Chip Industry
Taiwan’s semiconductor industry—a global leader in chip production—may also face disruption. Trump’s accusations that Taiwan “stole” U.S. chip production and his suggestion to impose tariffs on Taiwan’s semiconductor exports have rattled industry leaders. Analysts worry that Trump’s policies could drive Taiwan’s chipmakers to shift production to the U.S. to avoid tariffs, threatening Taiwan’s “silicon shield”—a term used to describe the island’s critical role in the global chip supply chain, which some believe deters Beijing from invading.
Taiwan Semiconductor Manufacturing Company (TSMC), which produces 90% of the world’s advanced chips, recently came under scrutiny. The U.S. ordered TSMC to stop supplying advanced chips to Chinese firms, a move triggered by reports that TSMC’s chips were found in Huawei devices. While TSMC denies supplying chips to Huawei since 2020, concerns persist over indirect access via other Chinese firms. Trump’s administration is expected to tighten export controls, which could hinder Taiwan’s chip exports.
What’s Next for Taiwan?
As Trump’s foreign policy team takes shape, Taiwan will watch closely for signs of his approach to defense, alliances, and trade. Trump’s past statements about “making Taiwan pay” have raised concerns about future demands. Experts predict that Taiwan will need to “dramatically increase spending on U.S. weapons and training,” according to Ivan Kanapathy, a former National Security Council official under both Trump and Biden.
While Taiwan’s government may seek to portray stability in its U.S. ties, the island’s economic and security future hangs in the balance. Increased defense spending, coupled with potential tariff-related shifts in chip production, could place significant strain on Taiwan’s resources. For now, all eyes are on Trump’s next move and what it means for Taiwan’s security and semiconductor industry.
