Abstract
As of today, Taiwan is one of the main geopolitical hotspots for its importance in the global technology supply chain, its dominance in semiconductor production, and its strategic geographical position in the South China Sea. Along with oil and gas, the semiconductor industry plays an increasingly pivotal role in international relations, being at the center of attention for both governments and businesses. The new Trump administration has brought after just over 100 days in office significant uncertainty to many of the country’s allies, including Taiwan, which questions whether it can rely on continued support from the United States and fears for its independence from China.
History of Taiwan and US-Taiwan relations
The modern political status of Taiwan is deeply rooted in the complex history of China in the 20th century.
At the time the ROC (Republic of China) was founded in 1912, Taiwan had been under Japanese colonial rule since 1895, when the Qing dynasty ceded the island to Japan. The ROC began exercising jurisdiction over Taiwan only in 1945, with the end of the Second world war and the defeat of the Japanese empire.
The civil war in China, fought between the Republic Of China (ROC) and the Chinese communist party, ended in 1949 with the victory of the Communist party and the establishment of the People’s Republic of China (PRC). The ROC government then relocated to Taiwan, followed by 1.2 million people from China. Since then, the island of Taiwan has been administered by the ROC, leaving the two countries under two different governments. However, since 1949, Beijing has maintained that Taiwan is part of mainland China under its "One China" policy, while Taiwan has claimed independence under different governments.
Today formal recognition by the international community is very limited, however many countries maintain unofficial relations with Taiwan in order to facilitate trade and cooperation.
Regarding the relations with the US in particular, in 1979 the US officially recognized the PRC and ended the mutual defense treaty with Taiwan, enacting in the same year the Taiwan Relations Act (TRA). The latter allowed continued unofficial relations and arms sales to Taiwan to enable it to maintain a sufficient self-defense capability. This makes sense looking at American interests in the region, as Taiwan is for the US a vital economic and security partner holding a strategic geographical position. As a matter of fact, if the island were to be conquered by China, it would jeopardize American power in the Asia-Pacific region.
Since 1950, Taiwan has received 50 billion dollars worth of defense equipment from the US, just under Saudi Arabia, Japan and Israel. Military aid instead was interrupted after the formal recognition of the PCR, but it was allowed again starting from 2022. Still, Washington maintains a position of so-called “strategic ambiguity”, in place since 1979, an intentionally vague policy regarding whether it would intervene directly in Taiwan’s defense, discouraging both a unilateral declaration of independence and an invasion from China.
Taiwan’s importance in the global context
Although Taiwan is a relatively small island, it plays a key role in the current geopolitical scenario.
Taiwan is fundamental in today’s technology supply chain, producing more than 60% of the world's semiconductors chips and 90% of high performance chips used in AI computing. These types of commodities are critical for the global economy and for technology advancements. They are largely employed in a vast range of domains, from consumer electronics such as smartphones, laptops and TVs, to the automotive industry, high-Performance Computing and AI and even in the military industry. TSMC (Taiwan semiconductor manufacturing company) is the world’s first and largest chipmaker. The surge in trade between Taiwan and the United States in the past few decades is largely due to the rise of advanced technology and the fast-paced development that this field requires.
As a matter of fact, chip manufacturing is the central point in Taiwan-US geopolitical relations. Both countries are highly dependent on each other: on the one hand, the United States rely on Taipei’s imports to be able to continue to develop cutting-edge technologies and compete with other global powers, China above all, in the race for AI dominance. On the other hand, Taiwan needs the support of the US in terms of security and military equipment to survive as an independent state, and also in economic terms, given that 60 % of Taiwan’s exported computer components and 14% of total exports are being sold to the United States.
Moreover for the United States the fall of Taiwan in the hands of China could make American allies in Asia question their reliance on the US and severely threaten its influence in the Pacific. This would lead countries such as Thailand or the Philippines to gravitate towards Beijing’s sphere of influence, establishing China’s dominance in the region and finally ending the status the US has held since the end of the Cold War as sole great global power.
Nevertheless the US is not the only country relying on Taiwanese imports: China also needs chips for the manufactured goods it produces, to compete in the high-tech race. A potential military attack on the island would severely damage the Chinese economy at least in the short-term, making a full-scale invasion less plausible. It’s also true, on the other hand, that their relation is one of mutual dependency: China imports 40% of Taiwanese total exported goods, giving it strong economic leverage on the island.
Trump’s stance on Taiwanese defense
President Trump has criticized Taiwan for what he describes as unfair dominance in the semiconductor industry, threatening to impose tariffs to force companies to establish manufacturing premises in the country. He also accused Taipei’s government of spending too little on their own defense and relying too much on US’s support, pressuring Taiwan to increase their spending to 10% of their GDP.
As a result of the growing pressure that the current geopolitical scenario brings, Taiwan’s President Lai Ching-te has announced that the country will increase spending from roughly 2.45 percent of GDP to more than 3 percent, nonetheless this is unlikely to satisfy demands from the White House. Part of the motives behind the impossibility to increase the military budget is that Taiwan relies almost exclusively on the United States for arms sales due to its diplomatic constraints. This makes the island vulnerable to repeated delays in arms delivery.
Looking at global trade, the tariffs imposed by Donald Trump worldwide have not spared Taiwan: he announced a 32% reciprocal tariff on Taiwan’s goods on April 9, which is currently being suspended for 90 days, nonetheless the universal baseline tariff of 10% remains in place. The biggest problem in taxing computer chips is that they are part of a very complex and specialized supply chain that extends worldwide: many of these products are designed in the US and then manufactured in Taiwan or other countries such as Japan, South Korea, and China. The production of a typical chip to create a final product that can be delivered to consumers takes hundreds of stages and involves over 70 countries.
As for Washington’s relations with Beijing, the two great powers have agreed, following negotiations on May 12, to cut reciprocal tariffs for 90 days while they await further negotiations. The US promised to cut its import duties on Chinese products from the current 145% to 30%, while China moved from 125% tariffs to 10%, in order to mitigate the tensions generated by the trade war and avoid a full decoupling.
Both China and the US see dependence on Taiwan as a national security risk and are trying to increase their production of chips. To achieve its objective, former President Biden concluded in 2022 the CHIPS Act, which granted subsidies to companies to fund manufacturing facilities in the US. Recipients include both American companies, Intel above all, and foreign ones such as Samsung and Taiwan Semiconductor Manufacturing Company (TSMC). The Taiwanese company recently announced plans to invest an additional $100 billion in expanding its manufacturing operations in America, on top of the $65 billion already invested following the CHIPS Act funding, probably with the aim to try to avoid tariffs and to strengthen its ties with the United States, drawing support from Donal Trump.
China as well has started investing in its manufacturing independence, with the “Made in China 2025” strategic plan and the “Self-reliance” strategy, focusing on building a strong domestic semiconductor industry. These plans include massive state subsidies for local companies like SMIC, YMTC, and Huawei.
Taiwan as the flashpoint of US-China great power rivalry
Trump’s administration has brought significant turmoil not only in global trade, but also in the geopolitical order. The derogatory rhetoric against its allies and the shaky support given to Ukraine, has raised doubts on whether the US’s deterrence is actually credible.
In this unstable climate, China’s threats of a “reunification” are seeming ever more conceivable. Military forces have been rehearsing a naval blockade of the island through exercises, the latest of which took place in April and was called “Strait Thunder 2025A”, making it seem plausible that more are to come. Cutting maritime supply lines would mean an interruption of import of food and energy, on which Taiwan heavily relies, leading the country to an unsustainable scenario. A possible less risky strategy for Beijing could be to restrict shipping through only a partial blockade, given that a full naval blockade would probably be viewed as an act of war, risking Washington’s involvement.
Regarding the US’s response, a memo signed by US Secretary of Defense Pete Hegseth last March stated the US would adopt a “denial defense” strategy to protect Taiwan in case of a Chinese invasion. This strategy involves increasing the US’ military presence through bombers, submarines and specialty units.
It’s not clear how the policy of “strategic ambiguity” will evolve. For the past 46 years it has preserved order, but as the Chinese military becomes more powerful, the need for a policy of strategic clarity becomes more evident. In any case, if Washington were to act, American allies in the region such as Japan or South Korea would probably intervene to support Taiwan in fear of their own survival, and other great powers like India, considering its deteriorating diplomatic relationship with China, would also not oppose.
Conclusions
In conclusion, Taiwan stands at the center of a great-power rivalry and as of today, its political independence is closely connected to its strategic role in the economic and trading landscape. As China intensifies its claims over the island, the importance of Taiwan, both economically and politically, has drawn increasing international attention, particularly from the United States. The future of the region will depend heavily on how the China-US relations will evolve and on whether President Trump’s approach to Taiwan will follow in the footsteps of his predecessors. It will be closely linked to the US’s credibility as an ally willing to intervene in case of an escalation. In the future, an eventual decline of Taiwan’s key role in semiconductor manufacturing, possibly jeopardized by a development in the two great powers' national industries, could imperil the island’s independence and democracy. An actualization of the “One China Policy” would strengthen Beijing and probably put an end to the dominance the US has had as a unipolar power since the end of the Cold War, completely restructuring the global order. Finally, it would draw many East and South Asian countries closer to China’s strategic bloc, both from an economic and political perspective.
Classification of sources and information:
1 | Confirmed | Confirmed by other independent sources; logical in itself; coherent with other information on the topic |
2 | Presumably true | Not confirmed; logical in itself; coherent with other information on the topic |
3 | Maybe true | Not confirmed; reasonably logical in itself; coherent with some other information on the topic |
4 | Uncertain | Not confirmed; possible but not logical in itself; no other information on the topic |
5 | Improbable | Not confirmed; not logical in itself; contradicts with other information on the topic |
6 | Not able to be evaluated | No basis to evaluate the validity of the information |
Trustworthiness of the source | ||
A | Trustworthy | No doubt about authenticity, reliability or competence; has a history of total trustworthiness |
B | Normally trustworthy | Small doubts about authenticity, reliability or competence, nevertheless has a history of valid information in a majority of cases |
C | Sufficiently trustworthy | Doubts about authenticity, reliability or competence; however, has supplied valid information in the past |
D | Normally not trustworthy | Significant doubt about authenticity, reliability or competence, however has supplied valid information in the past |
E | Not trustworthy | Lack of authenticity, reliability or competence; history of invalid information |
F | Not able to be evaluated | No basis to evaluate the validity of the information |
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