Taipei hails US 15% tariffs ‘home run’ despite fears over US$500 billion cost

Taiwan has secured a US deal slashing export tariffs to 15 per cent after more than nine months of talks, with Taipei hailing the result as a “home run” that would put the island on an equal footing with Japan and South Korea.\nBut observers and opposition parties have raised sharp concerns over Taiwan’s commitment to invest up to US$500 billion in the United States in exchange for the tariff cut.\nThe arrangement could hollow out Taiwan’s industrial base – particularly its prized semiconductor sector – while delivering disproportionate gains for Washington, they warned.\nBeijing has vehemently objected to the deal. “The Chinese side has consistently and firmly opposed countries that have established diplomatic relations with China entering into any agreements with the Taiwan region,” Guo Jiakun, a spokesman for the mainland foreign ministry, said on Friday.\nOn Wednesday, Beijing’s Taiwan Affairs Office spokeswoman Zhu Fenglian described the expected deal as “economic exploitation” of the island and a plot to drain the lifeblood of its industry.\nShe also condemned Taiwan’s ruling Democratic Progressive Party for bowing to US pressure. “[This] will only destroy the development prospect of Taiwan and harm the long-term interests of the Taiwanese people,” she cautioned.\nBeijing views Taiwan as a part of China, to be reunited by force if necessary. Most countries, including the US, do not recognise Taiwan as an independent state, but Washington is opposed to any attempt to take the self-governed island by force and is committed to supplying it with weapons.\nThe US agreement, announced on Thursday, lowers tariff rates from 20 per cent to 15 per cent, aligning Taiwan with other major American trade partners, including Japan, South Korea and the European Union.\nTaiwanese officials have stated that the deal also secures preferential treatment under potential future US Section 232 tariffs on semiconductors and other sensitive products.\nTaiwan’s Vice-Premier Cheng Li‑chun, who led the talks, said in a news conference aired live from the island’s representative office in Washington on Friday that the negotiations achieved “four core objectives”.\nThese included tariff parity, preferential treatment for semiconductors and semiconductor derivatives, and what she described as a uniquely flexible investment framework dubbed the “Taiwan model”.\nUnder that model, Taiwanese companies would plan and execute up to US$250 billion in direct investment in the US, while the Taiwanese government would provide credit guarantees enabling financial institutions to extend up to another US$250 billion in financing.\nCheng stressed that the guarantees did not constitute direct government spending and that companies would retain autonomy over investment decisions.\n“This is not industrial relocation, but the extension and expansion of Taiwan’s hi-tech industries,” Cheng said, rejecting claims that the deal amounted to hollowing out Taiwan’s economy.\nShe added that the US had committed to helping Taiwanese firms with land access, utilities, infrastructure, tax incentives and visa programmes to help build industrial clusters.\nTaiwanese leader William Lai Ching‑te echoed that message, saying on Friday that the agreement would strengthen Taiwan’s global competitiveness and deepen hi-tech cooperation with Washington.\nPremier Cho Jung-tai went further, calling the outcome a “beautiful home run” that showed Washington viewed Taiwan as a strategic partner.\nAs long as the main peak of Taiwan’s “sacred mountain” – a common metaphor for its semiconductor industry – remained at home, he said, the island could “stand firm domestically while deploying globally”.\nBut remarks by US Commerce Secretary Howard Lutnick have fuelled controversy in Taiwan.\nLutnick told American business news outlet CNBC in an interview soon after the talks that the goal under President Donald Trump was to “bring 40 per cent of Taiwan’s entire [semiconductor] supply chain and production” capacity to the US.\nFirms failing to build plants in the US could face tariffs as high as 100 per cent, he warned.\nThis has prompted alarm among Taiwan’s opposition parties, who argue that the deal reflects unequal bargaining power rather than a partnership of equals.\nThe main opposition Kuomintang (KMT) – a Beijing-friendly party – accused the Lai government of “dressing up a damaging outcome as a triumph”.\nKMT lawmakers said a “15 per cent tariff rate merely matches Japan and South Korea”, calling it a baseline outcome rather than an achievement, while the investment commitments “represent an unprecedented burden relative to Taiwan’s economic size”.\nRequiring as much as 40 per cent of Taiwan’s chip capacity to move overseas would strip the island of its core strategic assets, KMT chairwoman Cheng Li‑wun said.\n“If investing in the US were genuinely attractive, companies would have gone without geopolitical pressure,” she said, accusing the DPP government of “selling off the family silver” to please Washington.\nOther KMT lawmakers warned that the relocation would not stop with flagship firms such as Taiwan Semiconductor Manufacturing Co (TSMC) but would pull entire upstream and downstream supply chains overseas, hitting small and medium-sized enterprises that lacked the resources to absorb losses.\n\n\nThe smaller opposition Taiwan People’s Party (TPP) voiced similar concerns, saying it supported closer Taiwan-US exchanges but opposed what it called “unilateral concessions made without sufficient democratic oversight”.\n“Using public credit guarantees to back US investment could leave Taiwanese taxpayers exposed if projects fail,” a TPP statement warned.\nDachrahn Wu, a professor of economics at National Central University in Taoyuan, near Taipei, warned that diverting investment on such a scale to the US would inevitably crowd out Taiwan’s capital spending – a key driver of the island’s growth.\nOnce investment and talent moved, the impact would not be short-term, he said. “Over the next three to five years, economic growth, home consumption and even the housing market could be affected.”\nWu added that surging demand for US dollars to fund overseas investment could weaken the Taiwan dollar, benefiting exports but raising import prices and inflation risks.\nLiu Da‑nien, director of the Regional Development Study Centre, Chung-Hua Institution for Economic Research, noted that while headline investment figures appeared similar to Japan and South Korea, Taiwan’s commitments were heavily concentrated in advanced chip manufacturing, in contrast to their more diversified portfolios. “That concentration deserves close scrutiny.”\nHuang Kwei-bo, a professor of diplomacy at National Chengchi University in Taipei, warned that the US could weaken its supply-chain links with Taiwan in the event of a cross-strait conflict.\n“Once advanced semiconductor supply chains are established in the US, Washington may push to move some production out of Taiwan in response to cross-strait risks,” he said.\n“Together with talent and capital outflows, this would add significant uncertainty to Taiwan’s economic outlook.”\n