Taiwan Semiconductor: Caught in the Crossfire of U.S. Tariff Threats and Taiwan's Chip Tech Ambitions

Taiwan Semiconductor Manufacturing Company (TSMC), the world's leading contract chipmaker, finds itself in a delicate position as it navigates the complex geopolitical landscape between the United States and Taiwan. The company, which produces the most advanced chips globally, is facing pressure from both sides, with the U.S. threatening tariffs on semiconductor imports and Taiwan pushing to keep its advanced chip technology.

U.S. Tariff Threats

The Trump administration has repeatedly considered imposing stricter trade restrictions on foreign-made chips, particularly those linked to China. In February 2025, former President Donald Trump threatened a "25 percent or more tariff" on all semiconductor imports, stating that "we have to have chips made in this country" (The Wall Street Journal, 2025). This move, if implemented, could significantly impact TSMC's business, as Taiwan produces around 90% of the world's most advanced chips.

TSMC's decision to invest in U.S. chip manufacturing comes as the Biden administration pushes for domestic semiconductor production under the CHIPS and Science Act. However, with Trump emerging as the likely Republican candidate for the 2024 election, tsmc is also preparing for potential new trade policies. By expanding its manufacturing footprint in the U.S., TSMC aims to reduce its exposure to trade restrictions and maintain strong relations with policymakers.



Taiwan's Push for Advanced Chip Tech

On the other hand, Taiwan is eager to maintain its competitive edge in the global semiconductor market and is actively working to keep its advanced chip technology. In 2024, the Taiwanese government announced plans to invest NT$1.2 trillion (approximately US$38 billion) in the semiconductor industry over the next five years, aiming to solidify its position as a global leader in chip manufacturing (Taiwan News, 2024).

TSMC, as the crown jewel of Taiwan's semiconductor industry, plays a crucial role in these ambitions. The company's advanced manufacturing capabilities and global customer base make it an essential player in the global semiconductor ecosystem. However, TSMC's expansion in the U.S. has raised concerns about the potential loss of advanced chip technology to the U.S., which could undermine Taiwan's long-term competitiveness in the industry.

Balancing Act

TSMC must balance its strategic interests in maintaining access to both the U.S. and Chinese markets amidst geopolitical tensions and trade restrictions. The company's expansion in the U.S. is a strategic move to align with U.S. policy while securing its foothold in the American market. However, it must also maintain business in China, which remains a major consumer of its chips.

To navigate this complex landscape, TSMC employs several strategic measures, such as diversifying its manufacturing footprint, developing advanced packaging technologies, and collaborating with international partners. By employing these strategies, TSMC aims to balance its interests in the U.S. and Chinese markets while navigating geopolitical tensions and trade restrictions.

In conclusion, TSMC finds itself caught between U.S. tariff threats and Taiwan's push to keep advanced chip technology. The company's expansion in the U.S. is a strategic move to mitigate potential disruptions from geopolitical tensions and maintain access to critical markets. However, TSMC must also balance its interests in the U.S. and Chinese markets while ensuring uninterrupted access to both regions. By employing a diversified manufacturing footprint, advanced packaging technologies, and international partnerships, TSMC can maintain its position as the world's leading contract chipmaker while navigating the complex geopolitical landscape.

Ask Aime: How will TSMC's expansion in the U.S. influence its relationship with China and the geopolitical landscape?