The Trump administration has designated Taiwan as subject to tariffs tied to investment commitments. Semiconductor companies can reduce their tariff burden by building plants in the United States, securing duty-free quotas, and using foreign-trade zones. The United States continues to reshape global supply chains through tariffs, national security measures, and investment policies, with semiconductors and drones emerging as two of the most closely watched sectors. For Taiwanese companies, tariffs are no longer simply a cost concern. They are increasingly tied to U.S. investment, supply chain origins, and corporate status determinations, creating new challenges for global operations.
U.S. Reshapes Supply Chains on National Security Grounds as Tariffs Become Investment Incentives
The Trump administration announced that tariffs of up to 100% on certain drones and components would take effect on September 3. The measure aims to reduce heavy dependence on overseas supply chains and strengthen related U.S. industries. U.S. Secretary of Commerce Howard Lutnick also said the government was developing a new semiconductor tariff framework. He emphasized that the core principle of future tariff policy is clear: foreign companies must build factories in the United States to qualify for tariff exemptions.
Shin-Horng Chen, Vice President of the Chung-Hua Institution for Economic Research (CIER), said the United States shifted toward Section 301, Section 232, bilateral trade agreements, and other instruments after the U.S. Supreme Court rejected President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose broad tariffs. Section 232 is based on national security considerations and offers broader scope and greater policy flexibility. It could therefore become a major U.S. tariff instrument.
The semiconductor measures under Section 232 took effect on January 15, 2026. The United States imposed tariffs of up to 25% on certain information and communications technology products containing designated advanced chips, including servers and graphics cards. However, the United States also established an extensive exemption mechanism. The exemption list covers nearly all technology applications currently considered essential to the United States, including AI data centers, research and development, maintenance services, and start-ups. It also extends to consumer and automotive electronics used outside data centers, including integrated circuits, servers, and industrial computers exported from Taiwan to the United States.
Semiconductor Exemptions Tied to U.S. Investment as Taiwanese Companies Balance Costs and Market Access
Chen indicated that the United States remains highly dependent on global technology supply chains. Imposing blanket tariffs would inevitably drive up costs for U.S. industries. The exemption framework therefore reflects both U.S. industrial needs and a policy objective of encouraging companies to invest in the United States. Under the Taiwan-U.S. Agreement on Reciprocal Trade, Taiwan secured a reduction in reciprocal tariffs to 15% without stacking. Investments in U.S. semiconductor production and related products may also qualify for duty-free quotas and other preferential treatment. This indicates that tariff policy is increasingly tied to investment commitments.
By comparison, the U.S. Section 232 measures targeting drones and certain components place greater emphasis on supply chain origins. Beginning September 3, 2026, designated drones and components face tariffs of up to 100%. Beyond certificates of origin, companies may also need complete bills of materials and clear visibility into the sources of critical technologies and suppliers across every tier of their supply chains. U.S. customs scrutiny is therefore expanding beyond where a product is manufactured to encompass who produces it and which supply chains are involved.
From Proof of Origin to Supply Chain Transparency: Companies Must Compete in Manufacturing As Well As Product Differentiation
Chen said a practical reason for the broad exemptions under the new U.S. tariff framework is to link tariff relief more closely to investment in the United States. Taiwan’s trade negotiating team previously committed to US$250 billion in U.S. investment. Under this arrangement, the Taiwan-U.S. Agreement on Reciprocal Trade lowers reciprocal tariffs on Taiwanese goods to 15% without stacking. Investments in semiconductors and related products may also qualify for duty-free quotas and preferential rates on imports exceeding those quotas. The lower tariff rate therefore comes with a clear policy expectation that Taiwan will expand its investment in the United States.
In response to the shift in U.S. trade policy, Taiwanese companies must look beyond relocating production or building factories in the United States. More importantly, they must increase the value added of their products and services. Companies that advance from smart manufacturing to AI-enabled products and services can build distinctive technological and application advantages that are difficult to replace. This would reduce their reliance on competition based solely on manufacturing costs.
For Taiwan, the U.S. push for “Made in America” will undoubtedly raise the cost of overseas expansion. However, it will also prompt companies to reassess their global production footprints. Future competitiveness will depend not only on where companies produce, but also on whether they can balance market access, supply chain resilience, technological differentiation, and investment returns. Investors should likewise look beyond the scale of a company’s U.S. investment and assess whether its technological capabilities, product competitiveness, and global footprint can generate long-term value.
Source: Shin-Horng Chen (September 4, 2026). Section 232 Semiconductor Measures Finalized: Is Investment-for-Exemption a Solution or a High-Stakes Gamble for Taiwanese Companies? Commercial Times. https://www.ctee.com.tw/news/20260904701422-430301