Three months on, the aftershocks of Donald Trump’s “Liberation Day” tariff spree in April 2025 continue to reverberate across East Asia. The United States imposed high tariff rates across the region, including 32 percent on goods from Taiwan, before backtracking and granting a partial 90-day reprieve for all countries except China. That window of reprieve is now closing; Taiwan and its neighbors face another episode of economic upheaval if the United States once again increases tariffs.

No matter if—or how—individual trade agreements get resolved, the impacts of the tariff-induced geoeconomic reordering are already being felt in Taiwan. In the short term, despite its extensive bilateral economic ties to the United States, Taiwan is relatively well positioned to withstand much of the pain that tariffs might bring to its export sector. Many of Taiwan’s leading industries can overcome tariffs due to a lack of viable competitors. Yet tariffs have already exacerbated the long-term challenges that Taiwan faces—not only economically, but also in terms of security and geopolitics.

The threat of tariffs has accelerated underlying trends that could destabilize Taiwan’s position in the region. Tariffs are further pushing companies to diversify their supply chains, which has increased competitive pressure from production hubs in lower-cost areas. Tariffs have also sped up efforts for mainland China to decouple from the United States, which will weaken the ability of the United States to use its economic leverage to deter conflict in the Taiwan Strait. And aggressive tariffs on Taiwan have soured Taiwanese public attitudes toward the United States, further complicating the domestic political challenge of balancing the dual superpowers of the United States and China.

The forces driving these developments predate Trump’s trade escalation; tariffs, however, have turbocharged them in ways that increase the challenges facing Taiwan. Regardless of whether tariff rates are further maintained at 10 percent, are negotiated down to a lower rate, or jump back up to the 32 percent threatened in April, the effects of the tariffs have already accelerated major changes that will shape Taiwan in the long term.

Economic Impacts: Taiwan’s Comparative Advantage Amid Sectoral Decline

Tariffs on Taiwanese goods will have a mixed impact on Taiwan’s economy. Despite its heavy reliance on exports to the United States, Taiwan’s economy is relatively well protected from some of the biggest trade shocks in the short term. Many of Taiwan’s world-leading industries, most notably advanced semiconductors, enjoy unrivaled preeminence or occupy an economic niche that faces limited competition. In some cases, Taiwan will benefit from Trump’s across-the-board tariffs: even more onerous tariffs on regional competitors—especially mainland China—provide Taiwan with a greater comparative advantage. If the United States places high rates on other export-oriented economies, the tariffs will not have a major immediate impact on Taiwan’s competitiveness. Yet Taiwan is not fully insulated in the long term: the economic impact of tariffs varies by sector, and tariffs are accelerating regional changes that are intensifying pressure on lower-margin industries.

Taiwanese exports have been shifting away from mainland China and toward the United States. While mainland China was Taiwan’s top export destination for much of the 2000s and 2010s, the United States has been the top market for Taiwanese goods since the beginning of 2024. Unsurprisingly, Taiwan is the largest semiconductor exporter to the United States: according to US Customs Data, Taiwan was responsible for 28 percent of the electronic integrated circuits imported into the United States in 2024. Taiwan’s exports to the United States are not limited to semiconductors, however. Taiwan is also the leading source of US imports of fasteners—screws, bolts, and other small metal items—and office machine parts.

Taiwan’s unique role in producing the world’s most advanced semiconductor chips insulates it from much of the shock of tariffs. Demand for chips is insatiable as more of the global economy relies on advanced computing. Taiwan’s advantage in the industry is well established: economists studying global trade and finance note that no other country is able to overtake Taiwan in the production of advanced chips in the foreseeable future, cushioning it from higher costs that tariffs might cause. Beyond semiconductors, Taiwan’s success in producing a range of niche, hard-to-replicate products also provides a comparative advantage, as few competitors exist to undercut Taiwanese businesses.

For other export sectors, though, Taiwan is vulnerable to tariff shocks. As US-China relations have deteriorated in the past decade, companies seeking to reduce political risk have shifted production away from China to a range of lower-cost locations. The sudden imposition, withdrawal, and escalation of US tariffs around the globe are accelerating the efforts of companies to diversify their supply chains. While some of this pressure redirects more business away from mainland China to Taiwan, which benefits Taiwan’s economy, the primary shift is toward lower-cost and lower-risk destinations such as Southeast Asia. As production expands and develops in these regions, their ability to outcompete Taiwan grows.

Taiwan’s fastener industry is at the forefront of these shifts. Ask anyone in Taiwan about the impact of tariffs on local businesses, and they are likely to bring up the struggles of screw and bolt manufacturers—especially small and medium-size enterprises that operate on relatively low margins. Taiwan developed a successful fastener industry built around industrial clusters across the island, but Taiwan’s dominance in the industry has been diminishing. Vietnam, Thailand, and India now all produce fasteners at a lower cost than Taiwan.

While competition is currently limited to low-end fasteners, tariff pressures are speeding up the pace at which a broader swath of production will shift away from Taiwan. Companies have been moving more of their overall manufacturing capacity to Southeast Asia, Mexico, and other lower-cost destinations, which is accelerating these countries’ capacity to outcompete Taiwan in a greater range of product lines. One analysis in late 2024 quoted sources saying that more than 10 fastener companies in Taiwan were closing every month; after tariffs, manufacturers claim they are losing money or seeing their orders plummet. Since the imposition of tariffs, the Taiwanese dollar (NTD) has also sharply appreciated against the US dollar, further hurting fastener exports.

Even if Taiwan can broker an advantageous trade deal with Trump, the uncertainty of the new US policy approach has already encouraged companies to double down on relocation efforts that will impact lower-margin Taiwanese industries. Semiconductors and advanced machines will weather tariffs in the near term, but other sectors—which are still a significant portion of Taiwan’s economy—are facing long-term crises.

Security Implications: Faster US-China Decoupling, Fewer Deterrents

Extremely high tariffs on trade between the United States and China also carry long-term security risks for Taiwan. Even after negotiating a deal to de-escalate a tit-for-tat trade war that pushed tariffs north of 100 percent, US tariffs on Chinese exports remain at 55 percent as of June 2025. These rates—nearly unthinkable just a few months ago—have sped up efforts to decouple the United States and Chinese economies more fully. By further accelerating decoupling, tariffs limit one of the main tools through which the United States can influence Beijing and prevent conflict in the Taiwan Strait.  

As numerous analysts across the political spectrum have noted, the United States holds substantial economic leverage over China. In April 2025 testimony to Congress, Stanford’s Orianna Skylar Mastro explained, “They are an export driven economy, and their connection to the global economy is number one. If they [China] believed trade with the US, allies, and partners would stop if they attacked Taiwan, they would never do it.” Stephen Brooks and Ben Vagle argue that China is much more reliant than the United States on global production networks, and is therefore much more vulnerable to economic pressure from the United States and its allies than many observers believe.

President Trump himself stated explicitly that tariffs can and should be an important force for economic deterrence: in a 2024 interview with the Wall Street Journal, Trump explained how he would use tariffs to deter the Chinese military. “I would say: ‘If you go into Taiwan, I’m sorry to do this, I’m going to tax you’—meaning impose tariffs—‘at 150% to 200%.’ He might even shut down trade altogether.” The prospect of economic disengagement from China, Trump noted, would be a strong disincentive for Chinese military action in the Taiwan Strait.

China’s leaders are also aware of these costs. One international media report suggests that China’s State Council—its top government body—reviewed a document in 2022 outlining the catastrophic costs to China’s economy from Western sanctions if it were to use its military toward Taiwan. Numerous think tank reports in the United States have estimated the potential costs to the global economy of Western sanctions against China in the trillions of dollars.

The United States has even greater economic leverage than in previous years to influence Beijing and ward off potential action toward Taiwan. Facing a sluggish economy with few obvious new sources of growth, China’s sensitivity to economic pressure is greater than ever. Policymakers have gone to great lengths to promote foreign investment, especially in high-tech sectors, which requires improving relations with the United States and other advanced economies. While much of this remains at the level of rhetoric, interviews with Chinese scholars suggest that political leaders have put economic growth at the top of their political agenda and are wary of any sources of instability that might further cramp new growth. 

Whether and how to decouple in the long term are matters of ongoing debate. The imposition of forced decoupling through tariffs without an imminent crisis, however, reduces the ability of the United States to exercise economic deterrence when it would be strategically useful for Taiwan’s security. Forcing a rapid and total separation means that the options available for the United States to exercise its regional influence are fewer and more costly, which reduces available sources of leverage to deter Beijing from military action.

Political Shifts: Declining Trust in the United States

The imposition of tariffs has also upended Taiwanese citizens’ views of, and confidence in their long-term partnership with, the United States. Taiwanese leaders and citizens alike recognize their dependence on the United States for both security and economic cooperation, but they also know that the United States has benefited greatly from its relations with Taiwan. Trump’s dismissal of Taiwanese concerns has diminished Taiwanese public support for the United States and further constrained domestic options for navigating international relations. 

Stuck between the United States and China, Taiwanese citizens have always harbored some skepticism about both superpowers. Survey data shows that Taiwanese citizens are more likely to view the United States as trustworthy than China—but most people view neither as trustworthy. In 2023, fewer than 10 percent of Taiwanese citizens agreed that mainland China was a trustworthy country—but only one-third said the same about the United States. Meanwhile, 55 percent of respondents did not agree that the United States was a trustworthy country.

While many Americans viewed the American and European response to Russia’s 2022 invasion of Ukraine as a sign of Western resolve and democratic solidarity, Taiwanese citizens viewed the incident as a sign that the United States would not defend Taiwan in the event of a war with the mainland. Taiwanese did not see weapons sales or economic sanctions as evidence of support; instead, they understood the Biden administration’s hard line against putting boots on the ground as a clear signal that America did not want to defend Taiwan. A 2021 survey run by the Taiwan Public Opinion Foundation found that 65 percent of Taiwanese trusted that the United States would respond with military intervention if the People’s Liberation Army attempted to take Taiwan; in March 2022, in the month following Russia’s invasion of Ukraine, this plummeted to 34.5 percent.

Aggressive US tariffs have further deepened citizens’ concerns about the island’s reliance on American interests. Taiwan tried to preempt tariffs through semiconductor diplomacy: in March, Taiwan Semiconductor Manufacturing Corporation (TSMC) announced an additional $165 billion investment in its American semiconductor production efforts. While President Lai Ching-te and TSMC Chairman C.C. Wei tried to defend the decision as a prudent business choice, Taiwanese citizens naturally worried that moving more chip production to the United States would weaken Taiwan’s “silicon shield” and diminish the chances that the United States would protect Taiwan. While observers have long blamed mainland Chinese misinformation campaigns for sowing doubt about America’s commitment to Taiwan—often called “America skepticism theory”—these moves brought such concerns closer to reality.

For Trump to hail TSMC’s investment and then further impose high tariffs on Taiwan was another slap in the face for the island. A survey by scholars published at Brookings found that Taiwanese opinions toward the United States plunged after the first few months of Trump’s second term. From July 2024 to April 2025, the share of Taiwanese citizens who viewed the United States as trustworthy dropped 9 percentage points (33 percent to 24 percent), while the share of citizens who viewed the United States positively dropped from 54 percent to 34 percent. Additional trade uncertainty or more tariffs on Taiwanese industry could further strain attitudes toward the United States.

The tariffs and backlash from the Taiwanese public have constrained Taiwan’s domestic political choices. With relations with mainland China deteriorating by the day, Taiwan under Lai Ching-te is even more reliant on the United States than before. Many Taiwanese want Lai to push back on US demands and stand up for Taiwan’s interests, but leaders are loath to risk doing anything that might provoke America’s mercurial leaders. Trump’s treatment of Ukrainian president Volodymyr Zelenskyy serves as a cautionary tale for regimes reliant on US support—but failing to push back could reduce political support for Lai and his Democratic Progressive Party amid extreme partisan infighting.

The economic, security, and political trends that are impacting Taiwan did not start with global tariffs, but the effects of the tariffs have accelerated the pace of each of these shifts. Taiwan’s lower-margin industries face new competitors as companies move production away from China; fewer deterrents are available to preserve peace in the Taiwan Strait; and growing public skepticism about the United States complicates Taiwan’s reliance on it and its ability to offset growing pressure from mainland China. Whatever trade deals emerge are unlikely to shift the overall trajectory of these trends. The impact is already being felt—and it means a new, riskier geopolitical environment for Taiwan and the region.

Image: TR Fastenings