In a recent interview with Bloomberg Businessweek, Republican presidential candidate Donald Trump stated that Taiwan should pay the United States for its defense, criticizing the island for not contributing anything in return. This remark caused shares of the Taiwanese chip manufacturer TSMC to drop on Wednesday.
“I know the people very well, respect them greatly. They did take about 100% of our chip business. I think Taiwan should pay us for defense,” Trump said in an interview on June 25 that was published on Tuesday. “You know, we’re no different than an insurance company. Taiwan doesn’t give us anything.”
The United States is Taiwan’s most important international supporter and arms supplier, although there is no formal defense agreement between the two, unlike the agreements Washington has with South Korea and Japan. However, the U.S. is bound by law to provide Taiwan with the means to defend itself.
Taiwan’s government has prioritized defense modernization, including the development of its own submarines, and has emphasized that the island’s security ultimately depends on its own efforts. Responding to Trump’s comments, Taiwan Premier Cho Jung-tai noted that Taiwan and the U.S. maintain good relations despite the lack of formal ties and that Taiwan is committed to strengthening its defenses.
“Taiwan has steadily strengthened its defense budget and demonstrated its responsibility to the international community,” Cho told reporters in Taipei. “We are willing to take on more responsibility; we are defending ourselves and ensuring our security.” Taiwan’s foreign ministry declined to comment on Trump’s remarks.
China views Taiwan as its territory and has increased military activity around the island over the past four years, aiming to pressure the democratically governed island, which rejects China’s sovereignty claims. U.S. President Joe Biden has exacerbated tensions with China by making statements suggesting the U.S. would defend Taiwan if attacked, deviating from the longstanding U.S. policy of “strategic ambiguity.” Since 1979, Washington and Taipei have had no official diplomatic or military relationship after the U.S. switched diplomatic recognition to Beijing and ended a mutual defense treaty with Taiwan.
TSMC, the dominant maker of advanced chips used in everything from AI applications to smartphones and fighter jets, is considered crucial to the global economy. Analysts believe any conflict over Taiwan would have devastating effects worldwide. Shares of Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world’s largest contract chipmaker and a significant supplier for Apple and Nvidia, fell 2.4% on Wednesday following Trump’s comments. The broader market also ended down 1%.
“Trump’s comments were plainly blunt. We see it as political rhetoric,” said Allen Huang, a vice president at Mega International Investment Service. “TSMC is an excellent company, and it has won out in the market over many rival companies in the United States.”
TSMC is investing billions in building new factories overseas, including $65 billion on three plants in Arizona, although it plans to keep most manufacturing in Taiwan. Taiwan also has a backlog of around $19 billion in arms deliveries from the United States, which U.S. officials and politicians have repeatedly pledged to expedite.
Since 2022, Taiwan has faced delays in receiving U.S. weapons, such as Stinger anti-aircraft missiles, as manufacturers prioritize supplying Ukraine in its conflict with Russia. In April, the U.S. Congress passed a significant foreign aid package, including military support for Taiwan, after House Republican leaders allowed a vote on the $95 billion package aimed at supporting Ukraine, Israel, Taiwan, and U.S. partners in the Indo-Pacific.
China held two days of war games around Taiwan shortly after President Lai Ching-te took office in May, claiming it was a response to his inauguration speech, which Beijing criticized for its separatist content. China has also engaged in grey zone warfare against Taiwan, using irregular tactics to keep Taiwan on high alert without engaging in open combat, including sending balloons over the island and conducting frequent air force missions near Taiwan.
Beijing has never renounced the use of force to bring Taiwan under its control. Lai, who insists that only the Taiwanese people can determine their future, has repeatedly offered to hold talks with China, but these offers have been consistently rejected.
