Taiwan said that TSMC will not face a 100% tariff on semiconductor imports to the US, following its decision to set up manufacturing plants in the country.

The exemption was confirmed by Liu Chin-ching, head of the National Development Council, who also noted that the US is open to further talks on tariffs with Taiwan.

TSMC recently announced plans to invest an additional US$100 billion in US operations, including new facilities in Arizona, bringing its total US investment to US$165 billion.

Shares of TSMC hit a record high after the announcement, and the Taiwan dollar strengthened to its highest level in a week.

United Microelectronics Corp, Taiwan’s second-largest chipmaker, may also mitigate tariff impacts through collaboration with Intel.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Manufacturing presence becomes the new currency for tariff negotiations

TSMC’s tariff exemption demonstrates how physical US manufacturing operations have become essential bargaining chips in trade policy.

The company’s massive $165 billion investment in Arizona—including three new fabrication plants, two advanced packaging facilities, and a research center—directly secured its exemption from the 100% semiconductor tariff 1.

This reflects a broader trend where companies are making substantial US investments to avoid punitive tariffs.

Apple received similar exemption status after pledging additional US manufacturing investments, while Samsung positioned itself favorably through its Texas chip fabs 2.

Even in other sectors, companies like MSI shifted motherboard and graphics card production from China to Taiwan when US tariffs on Chinese goods jumped from 10% to 25%, demonstrating how tariff policy actively reshapes global manufacturing decisions 3.

2️⃣ Semiconductor tariffs reflect decades-long US production decline

The 100% semiconductor tariff proposal addresses a strategic vulnerability that developed over three decades of declining US chip manufacturing.

US semiconductor production dropped dramatically from 40% of global output in 1990 to just 12% in 2022, creating heavy dependence on foreign suppliers 2.

This decline explains why countries like South Korea successfully negotiated more favorable terms—securing a 15% tariff rate through a $350 billion investment pledge that includes $200 billion specifically for semiconductor manufacturing 4.

Taiwan’s dominant position becomes clearer in this context, as the island produces approximately 90% of the world’s advanced semiconductors 5.

The tariff strategy essentially uses trade policy to reverse decades of manufacturing migration, with companies like TSMC making historically large investments to maintain market access while helping rebuild US production capacity.

Recent TSMC developments

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