'America First' policy undermines Taiwan's interests

Since the beginning of Donald Trump's second term as United States president, Washington's economic diplomacy has taken a distinctly inward turn. Under the "America First" doctrine, unilateralism and protectionism have replaced the rules-based multilateral trading system anchored by the World Trade Organization.

The shift crystallized on April 2 last year when the US abruptly imposed the so-called "reciprocal tariffs" on its trading partners worldwide. Taiwan was a key target of the arbitrary US measures. This shift toward Taiwan was three-pronged: imposing high tariffs on Taiwan's exports to the US, manipulating the appreciation of the new Taiwan dollar, and pressuring Taiwan to increase investment in the US.

Goods made in Taiwan were slapped with a "20 percent +N" tariff, adding an extra 20 percent over the existing rates. This not only exceeded general expectations in Taiwan but was also 5 percentage points higher than the tariffs imposed on imports from Japan and the Republic of Korea.

Such a steep hike substantially raises the production costs for Taiwan's companies exporting to the US, directly undermining the competitiveness of the island's products in the US market.

Pressuring the NT$ to appreciate has been another key tool used by the US to weaken Taiwan's export sector. In an article on Nov 13, 2025, The Economist magazine noted that the NT$ was undervalued by 55 percent against the US dollar, the most severe case in its global survey, and suggested that the Taiwan authorities plan a predictable, managed long-term appreciation path.

Analysts in Taiwan interpret this as an indicator that further NT$ appreciation is anticipated, with a strong probability that the US administration will actively encourage such a move in 2026.

The dual pressures of steep tariff barriers and an appreciating NT$ have dealt a severe blow to many Taiwan industries, particularly its traditional manufacturing base. According to statistics from the Taiwan authorities, among the four major manufacturing sectors in Taiwan, only the information and electronics industry recorded a positive output growth in the first three quarters of 2025. With the exception of the semiconductor-driven electronics industry, most sectors across Taiwan now face a stark and challenging outlook.

The US tariff policies have strained employment, household income and consumption in Taiwan, undermining the economic well-being of its residents. The number of workers classified as underemployed due to insufficient hours rose for three consecutive months from July to September 2025, reaching around 129,000.

The reduction in working hours in Taiwan has depressed household incomes and constrained consumer spending, exacerbating the already subdued momentum of domestic consumption on the island.

Beyond suppressing Taiwan's exports, the US tariff hikes and pressure on NT$ appreciation aim to force Taiwan to increase investment in the US, particularly in key supply chains such as semiconductors.

The arm-twisting by the US forced Taiwan Semiconductor Manufacturing Company, the island's leading chipmaker, to raise its investment in the US to $165 billion in March 2025, drawing along a cluster of upstream and downstream suppliers.

But the US remains unsatisfied. Some US media has reported that Washington is pushing Taiwan to invest $350 to $550 billion in the US. While unconfirmed, this reflects how Taiwan's key industries, especially semiconductors, are increasingly being drawn under US control, risking the hollowing out of Taiwan's core industries and the marginalization of its economy.

The so-called "reciprocal tariffs" not only defy basic market principles and the logic of economic globalization but are a blatant zero-sum bullying tactic. However, Taiwan's Democratic Progressive Party administration has prioritized ideology over economic rationality, ignoring market dynamics and the welfare of the island's residents.

Eager to curry favor with the US in pursuit of its separatist agenda, the DPP has acquiesced to American demands, willingly sacrificing Taiwan's competitive industries and the interests of its people.

The development of cross-Strait economic relations has repeatedly shown that cooperation benefits both sides, while division harms both. Faced with challenges such as the US "reciprocal tariffs," collaboration between businesses across the Strait is the most market-savvy and mutually beneficial response.

By leveraging the mainland's vast market, along with its robust infrastructure, talent pool and innovation capacity, the two sides of the Strait can deepen collaboration across industrial, supply, and innovation chains.

Working together, the two sides can better navigate uncertainties, strengthen resilience against external shocks, and pursue higher-quality development, a promising pathway that benefits people on both sides.

The author is an associate professor in the Institute of Taiwan Studies of Beijing Union University.

The views don't necessarily reflect those of China Daily.

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