Welcome listeners to Taiwan Tariff News and Tracker. Taiwan has firmly rejected the Trump administration's controversial "50-50 chip rule" proposal during recent trade negotiations in Washington.
Vice Premier Cheng Li-chiun returned from tariff talks on October 1st, categorically dismissing Commerce Secretary Howard Lutnick's demand that US companies must produce half their semiconductor needs domestically to avoid punitive tariffs. Taiwan's Central News Agency reports that Cheng stated this arrangement was "not discussed" and would "go against Taiwan-US supply chain cooperation."
The proposal would require American firms to maintain a 50-50 split between domestic and foreign chip production to qualify for tariff exemptions, with non-compliance triggering 100 percent duties. Lutnick emphasized in a NewsNation interview that the administration's objective is to significantly onshore chip manufacturing, declaring "we need to make our own chips."
This rejection comes amid existing tariff tensions. The Trump administration imposed a 20 percent reciprocal tariff on Taiwanese imports in July, steeper than rates applied to Japan or South Korea. However, semiconductors remain largely exempt under ongoing investigations, which is crucial since they account for roughly 70 percent of Taiwan's exports to America.
Taiwan's political opposition condemned the 50-50 proposal harshly. Kuomintang Chairman Eric Chu declared that "no one can sell out Taiwan or TSMC," while legislators characterized the demand as "exploitative" and "outright plunder." Taiwan People's Party Chairman Huang Kuo-chang called it an attempt to "hollow out the foundations of Taiwan's technology sector."
Despite tensions, Taiwan is pursuing a different strategy. Vice Premier Cheng proposed a "Taiwan model" for US investment, featuring government credit guarantees and industrial cluster development. This approach received positive feedback from American officials and differs from strategies used by Japan, South Korea, and the European Union.
Taiwan Semiconductor Manufacturing Company, which supplies 95 percent of advanced chips to the US market, remains central to these negotiations. TSMC shares actually rose 1.2 percent following the rejection announcement, with the company maintaining its 165 billion dollar commitment to Arizona facilities.
US Ambassador to China David Perdue confirmed that President Trump told Beijing that Washington won't change its Taiwan policy, adhering to the Taiwan Relations Act and existing frameworks while seeking peaceful resolution without coercion.
These developments underscore Taiwan's determination to protect its semiconductor dominance while navigating complex US-China dynamics.
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