- Taiwan’s semiconductor exports largely support US AI and data-center development…
- … and could be exempted in the first phase
- The upcoming Taiwan–US trade deal may help Taiwan secure preferential…
- …semiconductor tariff treatment in the second phase.
- The tariff development aligns with our base-case macro assumptions for 2026
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Policy details
The White House issued an executive order on January 15 to implement semiconductor tariffs on US trade partners. The plan will be rolled out in two phases.
In Phase 1, the US will immediately impose a 25% tariff on a very narrow category of semiconductors, covering certain advanced computing chips and selected derivative products. Importantly, these tariffs will not apply when chips are imported to support the buildout of the US technology supply chain, including: US data-center use, repairs or replacements performed in the US, US-based research and development, US startups, non-data-center consumer applications, non-data-center civil industrial applications, and US public-sector applications.
In Phase 2, after trade negotiations with partners conclude, the US will impose broader and more significant semiconductor tariffs. These will be accompanied by a tariff offset program, allowing companies that invest in US semiconductor production to receive preferential tariff treatment.
Impacts on Taiwan
The semiconductor tariffs may ultimately cover a wide range of Taiwan’s exports to the US. In Phase 1, “semiconductor articles” refer to imported products meeting certain technical parameters and classified under HTSUS codes 8471.50, 8471.80, and 8473.30, including processing units, other automatic data-processing units, and related parts and accessories.
In 2024, the US reported imports from Taiwan of: USD 15.5bn in semiconductors, USD 32.9bn in computer accessories, and USD 19.1bn in computers. From Taiwan’s perspective, in 2025 it reported USD 9.5bn in electronic parts exports to the US, and USD 151.7bn in information and communication product exports to the US. Most of these products are advanced logic chips or articles containing advanced logic chips, such as graphics cards and AI servers.
In practice, the majority of Taiwan’s semiconductor exports to the US are likely to be exempted in Phase 1. Taiwan’s semiconductor shipments largely support US technology supply-chain development, particularly the expansion of US-based data centers and AI infrastructure by US cloud service providers.
Taiwan’s exports of electronic parts and information and communication products to the US surged by USD 119.3bn over the past two years, rising from USD 41.9bn in 2023 to USD 161.7bn in 2025. This surge closely coincided with the boom in US data-center construction amid the ongoing AI cycle.
Looking ahead, trade negotiations may help Taiwan secure preferential treatment during the second phase of semiconductor tariffs. Taiwan is reportedly set to sign a trade deal with the US by the end of January, which would lower Taiwan’s reciprocal tariff rate to 15% from 20%, and secure preferential treatment under Section 232 tariffs. In exchange, Taiwan is reportedly committing to substantial US investment, including the construction of five additional TSMC foundries in the US.
Macro and market implications
The semiconductor tariff announcement, together with trade-deal developments, reinforces our base-case scenario for 2026. In our 2026 outlook, we assumed: a modest reduction in Taiwan’s reciprocal tariff rate, moderate semiconductor tariffs, and slower but still resilient AI demand. Accordingly, we maintain our forecast for Taiwan GDP growth of 4.8% in 2026, and an unchanged policy rate of 2.00% this year.
Equity and FX market reactions have been mild so far. The exemption conditions suggest that the Trump administration does not intend to implement blunt semiconductor tariffs that could disrupt AI development, at a time when AI has become a key pillar of US growth.
Key watch points ahead include the US Supreme Court decision on IEEPA tariffs, and the formal announcement of the Taiwan–US trade deal.
With the US entering the mid-term election cycle this year, expectations may rise for greater flexibility on tariff policy, as the administration seeks to limit cost pressures on US consumers and maintain voter support.
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Ma Tieying 馬鐵英, CFA
Senior Economist - Japan, South Korea, & Taiwan 經濟學家 - 日本, 南韓及台灣
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