As the Trump administration completes its first year in office, global trade has formally entered a new phase characterized by tariffs as the primary policy instrument. Against the backdrop of geopolitical realignment and economic restructuring, Taiwan and the U.S. concluded a tariff agreement on January 16 to successfully secure a reduction in tariffs on Taiwan’s exports to the U.S. to 15% without stacking on Most Favored Nation (MFN) rates. This effectively alleviates export pricing pressure and provides transitional support, particularly for traditional industries and small and medium-sized enterprises.
Shin-Horng Chen, Vice President of the Chung-Hua Institution for Economic Research (CIER), notes that while improved tariff conditions represent a positive development, the longstanding K-shaped divergence within Taiwan’s industrial sector is becoming increasingly pronounced. Information and communications technology and AI sectors continue their growth trajectory, whereas traditional industries such as automotive components face multiple pressures, including order migration, rising costs, and exchange rate volatility. This underscores how exclusion from free trade agreements and regional economic integration frameworks has eroded the international competitiveness of Taiwan’s products.
Vice President Chen indicates that Taiwan’s trade surplus with the U.S. is projected to climb to U.S.$150 billion. Future Taiwan-U.S. economic and trade dialogues will inevitably extend beyond tariffs to encompass non-tariff issues, including supply chain security, rules of origin certification, cybersecurity, and standards disclosure. The U.S. side may also require specific industries to strengthen their investment presence and local production capabilities in the U.S., with associated compliance costs that cannot be overlooked.
Regarding industrial adjustment strategies, Vice President Chen recommends a dual approach. On one hand, Taiwan can leverage its core integrated circuit and information and communications technology industries to expand supply chain momentum. On the other hand, Taiwan can pursue emerging industries such as unmanned aerial vehicles and humanoid robotics, or integrate AI-on-device technologies to assist traditional industries in upgrading their capabilities and entering new value chains.
Tariffs represent only the starting point. Subsequent measures will combine investment tax incentives, credit guarantees, and financing support mechanisms to mitigate the risks of international business deployment for enterprises. Only through strengthening industrial fundamentals and structural adjustment can Taiwan achieve stable and mutually beneficial long-term development within the new framework of Taiwan-U.S. economic and trade relations.
Author: CIER Editorial Team
Date: January 26, 2026