Taipei [Taiwan], August 2 (ANI): Taiwan is bracing for a significant economic challenge as US President Donald Trump threatens to impose a tariff on semiconductors, according to the Chung-Hua Institution for Economic Research (CIER), reported by Focus Taiwan.

Semiconductor industry is central to the island's exports and overall economy.

Information and communication technology (ICT) products account for over 70 percent of Taipei's exports to the United States, according to the CIER.

CIER President Lien Hsien-ming told CNA on Friday that Taiwan's dependence on semiconductors is notably higher than that of other countries. '

He said compared with other countries, the semiconductor industry carries a heavier weighting for Taiwan in terms of industrial and economic development.

In 2024, Taiwan recorded a trade surplus of USD 73.9 billion with the United States, up from USD 47.8 billion in 2023, largely driven by strong American demand for AI servers and semiconductors during the ongoing artificial intelligence boom.

'I think Trump really cares about a trade deficit resulting from purchases of high tech gadgets such as semiconductors,' Lien said, referring to a US investigation launched in April under Section 232 of the Trade Expansion Act of 1962, targeting ICT products--especially semiconductors--as part of a possible new tariff regime.

'As ICT products make up more than 70 percent of Taiwan's exports to the US, a tariff on semiconductors could have a bigger impact on Taiwan's economy than the 20 percent blanket tariff the White House announced Thursday,' Lien noted.

The newly announced blanket tariff rate was lowered from 32 percent, previously suggested by Trump on April 2.

In response, President Lai Ching-te said the 20 percent tariff was provisional and that Taiwan would continue negotiations with the US to secure a lower rate. Taiwan's negotiating team will also address the semiconductor issue directly with their American counterparts. Lai's statements reflect a growing focus within the Taiwanese government on the potential threat posed by a targeted semiconductor tariff.

'Lai's remarks show the government is focused on a possible tariff on semiconductors as such a levy could threaten Taiwan's economy,' Lien said, according to the Focus Taiwan.

CIER Vice President Chen Shin-horng echoed Lien's concerns, saying that based on current US negotiation tactics, targeted tariffs on specific industries like semiconductors are likely to be steeper than general blanket levies.

Chen added that Trump appears to be leveraging Section 232 of the Trade Expansion Act as a strategic tool to push for major foreign investments in the U.S.

Although the US may be aware that foreign chipmakers are unlikely to launch new production facilities in the short term, tariffs could still be phased in gradually.

A tariff under the clause could be set at a lower level at the beginning and gradually increased over the next two to three years, Chen noted.

Taiwan Semiconductor Manufacturing Co. (TSMC), currently investing USD 65 billion in Arizona with an additional USD 100 billion pledged, has already warned the US government that proposed tariffs on Taiwanese semiconductors could significantly undermine demand and disrupt its investment strategy.

'New import restrictions could jeopardize current U.S. leadership in the competitive technology industry and create uncertainties for many committed semiconductor capital projects in the US, including TSMC Arizona's significant investment plan in Phoenix,' the chipmaker wrote in a letter to the U.S. Department of Commerce in May, according to the Focus Taiwan.

US Commerce Secretary Howard Lutnick said in late July that results of the ongoing investigation will be announced within two weeks, ahead of any final decision on semiconductor tariffs. (ANI)