Trump Tariffs Spark Political Debate in Taiwan – The Diplomat

On April 2 – which Donald Trump dubbed “Liberation Day” – the U.S. president announced massive tariff hikes on nearly all U.S. trading partners, including 32 percent rate on Taiwan. Stock markets were quick to react in the lead-up to April 9, the date that Trump’s tariffs would have gone into effect. On April 7, shares for the Taiwan Stock Exchange, or Taiex, plunged by 9.7 percent, triggering a circuit breaker that temporarily halted trading. This was the largest one-day drop in history for Taiex. Emergency circuit breakers were also triggered in other Asian markets, such as Japan. 

Subsequent days have proven similar in terms of market volatility. Shares rallied when Trump announced a 90-day suspension of tariffs, with Taiwan included in the list of countries that will see tariffs of 10 percent instead of the rates Trump announced on April 2. Yet the Financial Supervisory Commission announced that measures to prevent short selling would remain in place for this week. Margins for short selling were raised from 90 percent to 130 percent, the limit of intraday sell orders was cut to 3 percent from 30 percent of the average trading volume of stock from the past 30 sessions, and rules on types of collateral that can be used to cover margin deficits were loosened. 

Trump’s original plan for 32 percent tariffs for Taiwan was notably only 2 points less than China, which originally faced 34 percent in tariffs. Analysts had expected that Trump might lash out economically at Taiwan, with Trump having previously accused Taiwan of “stealing” the U.S. semiconductor industry. Taiwan has also long faced accusations from the United States of deliberately undervaluing its currency, though Washington has historically stopped short of labeling Taiwan a currency manipulator – likely for political reasons. 

Indeed, Trump’s animus against Taiwan has often returned to the issue of semiconductors. When Taiwanese semiconductor manufacturing giant TSMC announced a $100 billion investment plan in the United States in March, Trump seemed to change his tune, calling TSMC CEO C.C. Wei “one of the most respected people in business.” Yet mixed signals from the Trump administration made it unclear as to whether semiconductors would be exempted or included in tariffs. 

Current signs are that the Trump administration’s tariff exemptions for electronics are only temporary, with Trump saying that specific tariffs for semiconductors would be announced in the next week. Shortly before Trump’s comments, Commerce Secretary Howard Lutnick had suggested a longer timeframe, saying that tariffs on semiconductors would be announced in a month or two. 

For its part, the Pentagon has emphasized that military ties with Taiwan will continue, in spite of the uncertainty over trade. The Department of Defense very probably hopes to separate U.S. trade policy from its defense policy, in terms of public perceptions. Yet it will be hard to avoid a conflation of the two in Taiwan, especially with Trump having suggested in the past that Taiwan should pay the United States for defense. Trump has repeatedly suggested that Taiwan is a freeloader on U.S. munificence.

It comes as no surprise, then, that the Trump administration’s tariffs have become an object of domestic political contention between the Democratic Progressive Party (DPP) of President Lai Ching-te and the Kuomintang (KMT). While the “Liberation Day” tariffs are global and hit close U.S. allies and partners across the board, the KMT initially called on the Lai administration to reshuffle the Cabinet in order to take responsibility for failing to avoid the tariffs. Later, both parties met to discuss countermeasures to the tariffs, but this has not prevented partisan contention.  

After news of the tariffs broke, Lai quickly announced that Taiwan would not seek reciprocal tariffs. Lai later published an op-ed in Bloomberg suggesting that Taiwan and the United States could deepen economic relationships to seek joint prosperity. 

But this led to criticism from KMT politicians, who said Lai had adopted a weak stance. KMT legislator Hsu Yu-chen argued that Taiwan should respond with tariffs. Pan-Blue media commentator Jaw Shaw-kong, who was the KMT’s vice presidential candidate in 2024, argued for suspending TSMC and UMC investments in the United States as a negotiating tactic. KMT legislator Luo Chi-chiang went a step further in calling on Americans to recall Trump in a social media post that was later deleted. Luo perhaps didn’t realize that there is no provision for recalling a president in either the United States or Taiwan at a time when the KMT is facing a wave of recall campaigns.  

There has also been back-and-forth between the pan-Blue and pan-Green camps about the notion of subsidies to alleviate affected industries. In early April, KMT chair Eric Chu and legislative caucus leader Fu Kun-chi initially demurred on the idea of subsidies for industry. Such hesitancy was likely due to the amount of political capital staked by the KMT earlier this year on drastically reducing the government’s operational budget in the name of fiscal balance. It would be seen as a reversal to immediately call for bailouts for industry in response to the tariffs. 

Nevertheless, Chu and Fu have now shifted toward calling for subsidies and, in fact, criticized the DPP for only approving 88 billion Taiwanese dollars (US$2.7 billion) in funding for industry relief measures. Chu called for NT$200 billion, while Fu now supports NT$140 billion in subsidies for industry, which the KMT had previously sought to cut. 

Trump has now backed off of the Liberation Day tariffs for at least 90 days, instead focusing on an escalating tariff war with China. Trump stated that countries that do not seek to retaliate against the United States will be “rewarded.” Measures called for by the KMT would have likely led to ire from the Trump administration. 

Some segments of the KMT, however, may actually hope to undercut Taiwan-U.S. ties in this way, instead seeking a return toward economic engagement with China. In response to the tariffs prompting much uncertainty about Taiwan-U.S. relations, the KMT has returned to usual canards about Taiwan needing Chinese tourism, arguing that Taiwan should seek to redouble economic ties with China. It is probable that as uncertainty about the Trump administration’s actions continues, the KMT will further lean into this narrative, in line with proposals to reintroduce the controversial Cross-Strait Services Trade Agreement – the proposed free trade agreement with China that sparked the 2014 Sunflower Movement – in the 2024 presidential election cycle.  

Broadly speaking, the KMT continues to lean into the U.S.-skeptic political narratives that began during the first Trump administration. Certainly, the uncertainty and turmoil of the Trump administration provide fertile ground for U.S.-skeptic political narratives. But a political strategy of simply lashing out at any measures proposed by the DPP and calling for the opposite may not be particularly effective move for the KMT either. In fact, at a time when the KMT faces an unprecedented wave of recall campaigns targeting all KMT legislators, this would more probably simply energize those already angered at the party’s actions.