This article was originally published by Radio Free Asia and is reprinted with permission.
U.S. President Donald Trump on Monday threatened tariffs of up to 100% on computer chips imported from Taiwan, which produces about 90% of the world’s most advanced chips.
Speaking to the annual Congressional Institute retreat of Republican lawmakers, which was held this year at the Trump National Doral Golf Club in Miami, Trump called China, Brazil and India “tremendous” at putting tariffs on imports and said America would soon join them.
“In particular, in the very near future, we’re going to be placing tariffs on foreign production of computer chips, semiconductors and pharmaceuticals, to return production of these essential goods to the United States of America,” Trump said. “They left us, and they went to Taiwan, which is about 98% of the chip business, by the way.”
Driven by industry heavyweight Taiwan Semiconductor Manufacturing, or TSMC, the self-governing and democratic island of Taiwan –- a U.S. ally -– produces about two-thirds of the world’s computer chips, including about 90% of the most advanced chips, which are used in artificial intelligence and military technology.
The dominance is part of the island’s “Silicon Shield” strategy, which aims to dissuade Beijing against invading Taiwan by making any potential conflict too costly to the wider world economy.
Trump said the tariff on Taiwan’s chips could be “25, 50 or even 100%,” which he said would make the companies producing chips decide to build new factories in the United States instead of in Taiwan.
Trump also slammed the bipartisan CHIPS and Science Act, which was signed by former President Joe Biden in August 2022, for offering billions of dollars in subsidies to microchip producers to return to the United States, saying it was not necessary to give them anything.
“They’re going to come in because it’s good for them to come in,” he said. “If you want to stop paying the taxes or the tariffs, you have to build your plant here in America. That’s what’s going to happen.”
‘The tariff king’
TSMC already opened a new manufacturing plant in Phoenix, Arizona, in 2022 using the subsidies from Biden’s CHIPS and Science Act.
But industry analysts say it could take decades for new U.S. microchip factories to catch up to those in Taiwan, which have for decades now led the world in their ability to imprint ever-smaller circuitry onto microchips using highly advanced lithography techniques.
TSMC founder Morris Chang in 2022 called U.S. efforts to unseat Taiwan’s dominance in making chips an “expensive, wasteful exercise in futility” and said the chips could end up being 50% more expensive.
Still, Trump said there were other benefits to tariffing imports.
In his speech, he referred to President William McKinley, who served from 1897 until his assassination in 1901, as “the tariff king” and quoted him saying that the “foreign producer” contributed “nothing” to America and should “pay for the privilege” of market access.
“In other words, you have to pay for the privilege of coming into our country, taking our jobs, taking our product, destroying our country,” Trump said. “Money is going to come into our coffers and America is going to be very rich again. It’s going to happen very quickly.”
He added that “relatively speaking,” America had been at its wealthiest from 1870 to 1913 when the federal government was primarily funded by tariffs instead of a broad income tax on workers. As tariffs go back up, income and other taxes will fall, the president then pledged.
“Under the ‘American First’ economic model, tariffs on other countries go up, taxes on American workers and businesses will come down, and massive numbers of jobs and factories will come home,” he said.
Economists largely credit America’s low-inflation economic boom from the 1990s onwards to the plethora of cheap goods being manufactured in China, which have kept prices down even as incomes have spiked.
Critics of Trump’s plans for across-the-board tariffs say the added costs they would create for American importers buying cheaper goods from abroad could lead to a surge in inflation just as price rises appear to be easing, flying in the face of Trump’s promise to reduce inflation.
But Trump has argued that it will be the foreign producers who will pay the added costs and that prices in America will be unaffected.
