Taiwan has firmly rejected a proposal from Washington that the US should produce half of the semiconductors it consumes, signalling a deeper layer of complexity in ongoing trade discussions between the two economies.
Vice Premier Cheng Li-chiun confirmed that the demand came from the US side and that Taiwan had never agreed to such a commitment.
The disagreement comes as both governments work to resolve tensions over reciprocal tariffs and the Section 232 investigation, which has expanded to cover a wider range of goods.
With semiconductors at the centre of bilateral trade, the debate highlights how chip security has become entangled with tariff policy.
Taiwan resists US semiconductor demand
Speaking on Wednesday, Cheng Li-chiun said the idea of meeting 50% of US semiconductor demand through local production was not on the negotiating table.
He clarified that Taiwan would not accept conditions of this nature, as the focus remained on Section 232-related concessions.
The US Commerce Secretary, Howard Lutnick, had earlier indicated in a NewsNation interview that Washington was in discussions with Taipei about reducing reliance on overseas chip production.
The comments underline the ongoing concerns in Washington about overdependence on Taiwan Semiconductor Manufacturing Co. (TSMC) and its extensive supply network.
US officials have consistently warned of risks linked to this concentration, particularly since the Covid-era shortages that disrupted industries ranging from car manufacturing to artificial intelligence development.
Section 232 investigation and tariffs
Taiwan’s cabinet stated that progress had been made following recent meetings with Lutnick and US representative Jamieson Greer.
More than 70% of Taiwan’s exports to the US are linked to semiconductors, which are directly affected by the Section 232 investigation. Negotiations are currently centred on reciprocal tariffs, Section 232 measures, and supply chain cooperation.
The US introduced a 20% reciprocal tariff on imports from Taiwan in July, which is higher than the rates applied to regional competitors such as Japan and South Korea.
Semiconductor products were exempted at the time, pending the outcome of the Section 232 review. Taiwan has signalled that any conclusion to negotiations will depend on both sides reaching agreement across these key areas.
US concerns over chip reliance
The US push to expand domestic semiconductor production stems from longstanding fears about reliance on a single market. Taiwan’s dominance in chip production has been identified as a strategic vulnerability.
During the Covid-19 pandemic, shortages of semiconductors exposed how critical the supply chain is for multiple sectors, including defence and advanced technology.
Washington’s latest proposal reflects this priority, but Taipei’s rejection highlights the limits of how far trade partners are willing to go in restructuring global chipmaking capacity.
Talks move towards supply chain cooperation
Despite the rejection of the 50% production demand, Taiwan confirmed that it remains committed to dialogue on broader cooperation. Both sides continue to weigh the impact of tariffs and regulatory investigations on semiconductor trade.
The outcome of these negotiations will not only influence trade balances but also shape how global chip supply chains evolve at a time of heightened geopolitical competition.
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