The Taiwanese government is under increasing pressure to review its import duties on U.S. goods and trade practices following the announcement of a 32% reciprocal tariff by the administration of former U.S. President Donald Trump. Economists and trade analysts argue that Taiwan’s existing trade barriers contributed to this hefty tariff and must be reconsidered to maintain economic stability and growth.
Understanding the Trade War and Taiwan’s Position
The United States Trade Representative (USTR) recently published a report identifying Taiwan’s restrictive trade policies, including high tariffs on automobiles, beef, and pork. This report serves as the foundation for the reciprocal tariff imposed by Washington, reflecting concerns over Taiwan’s protectionist trade measures.
How Taiwan’s Tariffs Compare to Other Countries
Trade experts point out that Taiwan’s 32% tariff rate is significantly higher than:
- Japan’s 24%
- South Korea’s 26%
This disparity has raised questions, especially considering Taiwan’s $100 billion investment in U.S. semiconductor manufacturing through Taiwan Semiconductor Manufacturing Co. (TSMC). Despite this massive investment, Taiwan still received a higher tariff than other major Asian economies.
The Economic Impact on Taiwan’s Export Market
Taiwan’s economy is heavily dependent on exports, and the U.S. has now become Taiwan’s largest export market for the first time in 24 years. In February 2025, Taiwanese exports to the U.S. surpassed those to China and Hong Kong, accounting for 28.5% of total exports, compared to 28.4% for China and Hong Kong combined.
This shift underscores Taiwan’s increasing reliance on U.S. trade, making the new 32% tariff particularly damaging. According to National Central University economics professor Dachrahn Wu, the tariff could impact 15-20% of Taiwan’s GDP in 2025, given that exports contribute 60% of Taiwan’s economic output.
Potential Solutions: Adjusting Taiwan’s Trade Policies
Experts are now urging the Taiwanese government to take proactive steps to mitigate the economic fallout from the tariff hike. Possible strategies include:
1. Revisiting Tariffs on U.S. Goods
Economists suggest lowering Taiwan’s import duties on specific U.S. products, such as:
- Automobiles (currently taxed at 17.5%)
- Health food products (currently taxed at 30%)
Reducing these tariffs could serve as bargaining chips in trade negotiations with Washington.
2. Increasing U.S. Imports to Reduce the Trade Deficit
Taiwan currently runs a massive trade surplus with the U.S., with a $73.92 billion deficit for the U.S. in 2024—the sixth largest among U.S. trading partners. To address this, Taiwan could:
- Purchase more U.S. natural gas and oil
- Increase American-made product imports
- Encourage Taiwanese companies to expand U.S. manufacturing operations
3. Strengthening Taiwan’s Industrial Strategy
As U.S. tariffs target Taiwanese industries, companies must reassess their global supply chains. Many Taiwanese manufacturers have relocated production to Vietnam and Thailand, but those countries are now facing even higher U.S. tariffs (Vietnam: 46%, Thailand: 37%).
This means Taiwanese firms must reconsider their manufacturing strategies and explore alternative locations or expand in the U.S. to mitigate tariff risks.
4. Negotiating a Trade Agreement with the U.S.
Taiwan could initiate talks for a free trade agreement (FTA) or a trade revision with Washington to address tariff disparities. While Taiwan and the U.S. recently signed the U.S.-Taiwan Initiative on 21st Century Trade, it did not fully resolve tariff-related concerns.
Challenges Ahead for Taiwan’s Economy
Despite these possible solutions, Taiwan faces significant challenges:
- U.S. trade policies remain unpredictable, especially with upcoming elections.
- Semiconductor supply chains are shifting to the U.S., raising concerns about Taiwan’s long-term economic stability.
- High U.S. labor costs and regulatory barriers make it difficult for Taiwanese businesses to relocate operations to the U.S.
Expert Opinions on Taiwan’s Next Steps
Economists like Cathay United Bank’s chief economist Lin Chi-chao believe that:
- Revising Taiwan’s tariff policies could help ease trade tensions with the U.S.
- Encouraging Taiwanese firms to invest more in the U.S. might align with Washington’s push for “Made in America” manufacturing.
- Taiwan’s government must act quickly to prevent a severe economic slowdown.
Conclusion
The U.S. tariff hike on Taiwan signals a critical turning point in trade relations between the two allies. While Taiwan’s government has options to mitigate the damage, quick action is needed to revise tariff policies, negotiate with Washington, and adapt Taiwan’s trade strategy. With Taiwan’s economic future at stake, policymakers must find a balanced approach to maintain stability and strengthen Taiwan’s position in global trade.
FAQs
Why did the U.S. impose a 32% tariff on Taiwan?
The U.S. Trade Representative identified Taiwan’s high tariffs on American goods, particularly automobiles, beef, and pork, as trade barriers. In response, the U.S. imposed a reciprocal 32% tariff on Taiwanese imports.
How will this tariff impact Taiwan’s economy?
The new tariffs could affect 15-20% of Taiwan’s GDP, given Taiwan’s reliance on U.S. exports. Industries such as semiconductors, steel, and petrochemicals will face higher costs, reducing competitiveness.
What steps can Taiwan take to reduce trade tensions?
Taiwan could:
Lower tariffs on key U.S. goods to improve trade relations.
Increase U.S. imports, especially in energy and manufactured goods.
Encourage Taiwanese companies to invest in the U.S.
Negotiate a new trade agreement with Washington.
How does Taiwan’s tariff compare to other Asian countries?
Taiwan’s 32% tariff is higher than:
Japan (24%)
South Korea (26%)
Vietnam (46%)
Thailand (37%)
Will the semiconductor industry be affected?
Yes, the shift in semiconductor supply chains to the U.S. could reduce Taiwan’s role as the global chip leader, impacting economic stability.
