TAIPEI (Taiwan News) — US President Donald Trump announced plans on Monday to impose tariffs on Taiwan’s semiconductors.

Trump highlighted that many major US tech companies have become heavily dependent on Taiwan’s TSMC for their chip production. “They left us and went to Taiwan,” he said, per PC Mag.

The announcement was made during a speech at a House Republicans meeting in Florida, where Trump outlined his new strategy. He said the proposed tariffs would focus on the foreign production of computer chips, semiconductors, and pharmaceuticals.

Tariffs are typically a percentage of the price that a buyer pays a foreign seller. Variations depend on existing trade agreements between countries, according to PBS News.

It is important to note that tariffs are paid by importers, usually American companies, who then pass on the higher costs to consumers through increased prices.

Trump said that these industries had left the US and moved to Taiwan, CNA reported, which he claimed now accounts for approximately 98% of the global semiconductor market. He suggested a “25%, 50%, or even 100% tax” would force companies to build more production in the US.

Trump stated, “We don’t want to give them billions of dollars like this ridiculous program that Biden has given everybody billions of dollars.”

In 2022, former President Joe Biden signed the Chips and Science Act, which allocated over US$52 billion in subsidies to chip companies that manufacture in America. The act's goal is to strengthen American semiconductor production.

“They’re gonna build their factory with their own money. We don’t have to give them money,” Trump said, emphasizing his stance on reducing reliance on government subsidies for companies such as TSMC.

In April 2024, the US Department of Commerce and TSMC Arizona jointly announced up to US$6.6 billion in direct funding through the Chips Act to bring advanced chip manufacturing to the US, TSMC Arizona said.

While TSMC has set up a factory in Arizona, which began construction in 2021, a significant portion of its chip production is still based in Taiwan. Once its Arizona fab begins operations early this year, TSMC plans to serve major clients such as Apple, Nvidia, Qualcomm, and AMD.

TSMC’s chips are typically not exported directly to the US, but instead sent to China and other Asian countries for assembly into consumer electronics before reaching the US market. If tariffs are imposed, this could lead to higher prices for a wide range of products that rely on TSMC-made chips.

Trump, however, argues that the solution to avoiding such tariffs would be for companies to establish their chip manufacturing plants directly in the US. “The only way you’ll get out of this is to build your plant —if you want to stop paying the taxes or the tariffs— you’ll have to build your plant right here in America,” Trump said.

“That’s what’s going to happen at record levels.” While Trump’s argument focuses on encouraging domestic production, it’s important to note that building a chip factory takes several years.

Intel received US$7.9 billion from the Chips Act last year to help expand its factories in Arizona, New Mexico, Oregon, and Ohio, where it is building a new chip manufacturing hub. Despite these efforts, Trump believes his tariff proposal could motivate more US tech companies to shift their chip production back to the US instead of continuing operations in Taiwan.

Trump compared his proposed tariffs to the high tariffs implemented by former President William McKinley in the late 1890s. However, economists have warned that such tariffs could lead to higher consumer prices, which runs counter to Trump’s earlier promises to reduce inflation.

While tariffs can hurt foreign economies by making their products more expensive and harder to sell abroad, they also raise costs for companies and consumers reliant on imports. The tariffs are likely to provoke retaliation from other countries.

The European Union responded to Trump's tariffs on steel and aluminum in 2018 by imposing taxes on US products, from bourbon to Harley-Davidson motorcycles. Similarly, China retaliated against Trump's trade war by placing tariffs on American goods such as soybeans and pork.

Economists from MIT, the University of Zurich, Harvard, and the World Bank conducted a study that found Trump’s tariffs in his first term did not fulfill their intended purpose of bringing jobs back to the American heartland. The study concluded that the tariffs had no impact on US employment, stating that they “neither increased nor decreased” jobs in the sectors they aimed to protect.