Taiwan under Trump 2.0

As Donald Trump moves into the White House for the second time, nothing is certain. But Taiwan should be prepared to devote considerable effort and resources to demonstrate its resolve and to maintain smooth and productive relations with the new US administration.

By Darryl Lupton
 

What are the geopolitical implications for Taiwan under Trump 2.0? In Robin Niblett’s 2024 book The New Cold War, he explores the escalating rivalry between the United States (US) and China, emphasising the global nature of this competition, which spans economics, technology, military strategy, and diplomacy. The outcome, he asserts, will profoundly shape the 21st century and the international order. In it he highlights Taiwan as a central flashpoint. How will president-elect Trump deal with the Taiwan question differently from the outgoing Biden administration and from his first term in office in 2017? Answers to these questions will impact more than just the 23 million inhabitants of Taiwan but also the US alliance network in Asia, including Japan, South Korea, the Philippines and extending to Australia. The US defence (or not) of Taiwan is front and centre of the relationship, but other issues relating to Taiwan’s own defence budget and willingness to defend the island, Taiwan’s purchases of US military equipment, its trade surplus with the US, and Taiwan’s chip and tech investments in the US are important in determining how Trump and Taiwan reestablish their political relationship. In order to placate a more emboldened Trump administration in 2025, Taiwan’s diplomats will need to be astute and aware of what matters to Donald Trump and his vision for America. Perceived early wins for Trump and addressing his primary concerns will ensure a smoother relationship; nevertheless, the balance between concessions and firmness on conveying realities will be the formula needed as the loss of Taiwan to China would be enormously detrimental to US interests.

Taiwan is integral to US strategic interests. It is a vital link in the first island chain that stretches from Japan past the Philippines and helps to contain People Liberation Army (PLA) navy and aircraft. If the People’s Republic of China (PRC) annexed Taiwan, then the Chinese military would have unfettered and undetected access to the Pacific that would result in China being able to project power and making the US (and allies like Australia) more vulnerable. What’s more, if China were to take the democratic island of Taiwan, it would undoubtedly coerce semiconductor chip secrets from Taiwan Semiconductor Manufacturing Company (TSMC). Despite this company dominating the chip foundry business, there are multiple international players in the supply chain, including American designers of the chips. However, China would still gain vast amounts of intellectual property through intimidation and greatly advance its own indigenous chip industry. Even more importantly, it would deny cutting edge chips to the US as production facilities abroad are at least a generation behind the chips produced in Taiwan. These cogent arguments are surely known by Trump’s policy advisors and it will be the job of the Taiwan lobby groups in Washington to remind them to strongly push these facts through to the president.

Ian Bremmer of the Eurasia Group has warned that dealings with the Trump administration may require financial greasing of the political wheels for greater access and a more favourable ear. This has been demonstrated by Elon Musk’s access to a government position and influence within the Trump inner circle by way of a quarter of a billion dollars through donations to his election campaign fund. Major companies, including tech companies like Microsoft, Google, and Apple have donated a million dollars each to Trump’s inauguration and overall the fund has garnered contributions more than three times what Biden’s inauguration raised. Trump has far greater power than in his first term. He is also vastly more experienced in politics now and has less restraint from traditional Republican advisors. Instead, with Make America Great Again (MAGA) loyalists in key positions and with control of Congress, the House and Senate, plus the supreme court, Trump feels that a decisive election victory gives him a clear mandate to pursue his goals. Even before his inauguration ceremony, Trump has already accelerated the demise of the Canadian Prime Minister, Justin Trudeau. Taiwan influencers in Washington will need funds, diplomacy and concrete promises to persuade an all-powerful Trump.

Trump will be wary of hollow promises this time round as US president. Some examples of less than sincere promises or assurances in his first term include those made by China regarding purchasing US products like soybeans to help offset the trade imbalance. In addition, Foxconn’s Taiwanese founder Terry Gou promised Trump in 2017 that a tech factory in Wisconsin would lead to 13,000 jobs. In reality, fewer than 300 jobs were created, leaving Trump’s ambitious job creation programme wanting. Regarding the TSMC fab (chip factory) that just began production of 4 nanometre chips in Arizona this month, Trump has been less than appreciative of this achievement despite US Secretary of Commerce, Gina Raimondo, giving credit to Trump for the start of the initiative. The factory has been subsidised over US$6 billion by the CHIPS and Science Act, which Trump doesn’t consider a good deal. He asserts that tariffs would have gotten the fab built for free. Nevertheless, TSMC has agreed to expand its planned investment by US$25 billion to US$65 billion by 2030. This will ensure progression to producing 2 nanometre chips, again a groundbreaking achievement for the US chip industry. This insulation from chip production delays due to possible conflict in the Taiwan Strait is a major coup for the US tech and artificial intelligence (AI) industry. This key message needs to be relayed to incoming President Trump. The US desperately needs chip access and dominance over its rivals at this crucial juncture in AI development and TSMC is the golden goose that needs to be recognised for its singular production skills.

Tariffs are Trump’s favourite form of coercion. As his first presidency showed, he is more isolationist and transactional with friends and foes alike and generally doesn’t see military conflict as desirable. Instead, he uses US economic power as the world’s largest economy to try to influence countries. He has already threatened the US’s largest trading partner, Mexico, and Canada with tariffs – most likely as a means to get immigration and other objectives met. Moreover, he has threatened to use tariffs on most trading partners, especially ones with a trade surplus, in order to encourage local production. This approach had mixed success during his first term as president and with local US importers paying for the tariffs, this means higher prices and likely inflation. Replacing imports with local production cannot be done overnight, so will American consumers be patient with higher prices, something that helped prompt them to shun the Democrats in the recent election? Taiwan has a trade surplus with the US; this might make Taiwan a target for Trump’s tariffs. Again, messaging by Taiwan diplomats that key tech exports are vital to the US economy and higher prices would disadvantage American-made products that use this tech, is paramount. How can the US win the AI race if they are being hampered with unnecessary cost burdens? Taiwan companies have already moved some production facilities to the US, and more are planned. For instance, at the end of 2024, Foxconn bought a 10-acre tract of land north of Houston to expand its electronic production operations. If concerted efforts are made to accommodate new US manufacturing policies, then credit should be acknowledged, as the cost of business is clearly more expensive in North America.