A hot potato: The United States’ relationship with Taiwan could come under strain should Donald Trump be elected president for a second time. The former POTUS believes the island should pay the US for defense, while also claiming that Taiwan took America’s chip business and made itself rich in the process.
Speaking in an interview with Bloomberg Businessweek conducted before the weekend’s assassination attempt, Trump was asked if he would defend Taiwan from an invasion by China, something that seems increasingly likely, especially as President Xi Jinping has said reunification is a “historical inevitability.”
“Taiwan should pay us for defense,” Trump said. “You know, we’re no different than an insurance company. Taiwan doesn’t give us anything,” he added.
Trump also claimed that Taiwan took America’s chip industry. “Taiwan took our chip business from us, I mean, how stupid are we? They took all of our chip business. They’re immensely wealthy.”
“Now we’re giving them billions of dollars to build new chips in our country, and then they’re going to take that too, in other words, they’ll build it but then they’ll bring it back to their country.”
Taiwan is expected to produce around 66% of the world’s most advanced chips this year, writes TrendForce, while the US is expected to account for just 6%. TSMC is the island’s biggest player, having briefly seen its market cap hit $1 trillion earlier this month as it produces more chips for firms such as Apple, AMD, Nvidia, Intel, Qualcomm, Broadcom, and others.
The $52 billion US CHIPS Act was introduced to try and improve the country’s competitiveness in the chip manufacturing market while also lessening reliance on Asia. It’s believed that the investment will see the US produce around 20% of the world’s most advanced chips by 2030.
Most analysts believe that a Chinese invasion of Taiwan would be fairly disastrous for the electronics industry and, according to Commerce Secretary Gina Raimondo, could lead to a deep and immediate US recession.
There have been suggestions that the TSMC plants could be disabled remotely. There have also been questions over whether the US could bomb TSMC in the event of a Chinese takeover, but Taiwan wouldn’t allow it, and the company says such action is unnecessary.
In 2022, TSMC chairman Mark Liu said that a Chinese invasion of Taiwan would result in the company’s factories becoming inoperable, underlining the point that “Nobody can control TSMC by force.”
The Taiwan Relations Act requires the US to “provide Taiwan with arms of a defensive character” and “to maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan.”
Responding to Trump’s statement, Taiwanese Premier Cho Jun-tai said that Taiwan and the US maintain a good relationship, but the island is willing to take on more responsibility to defend itself and has strengthened its defense budget.
TSMC’s shares closed 2.4% lower in Taiwan following the publication of Trump’s statements.