The U.S. midterm elections concluded with a decisive Republican defeat and the party losing its majorities in both the House and Senate. Public dissatisfaction with the cost of living was a major factor. Pre-election surveys showed that energy, food, healthcare, and housing expenses continued to trouble voters. Exit polls also reflected dissatisfaction with the war in Iran, government performance, and President Donald Trump. Despite continued economic growth, many households saw little improvement in their daily lives and ultimately demanded change at the ballot box.
Daniel Liu, Director of the Regional Development Study Center at the Chung-Hua Institution for Economic Research (CIER), noted that the election also highlighted the gap between Trump’s policy agenda and voters’ expectations. Trump has repeatedly accused foreign countries of taking advantage of the United States. Through tariffs and investment demands, he has sought to bring manufacturing back to the United States and “Make America Great Again.” Voters, however, have a more immediate demand: “Make America Affordable Again.” In the 2024 presidential election, frustration with high inflation cost the Democratic Party the White House. Two years later, voters punished the Trump administration for failing to ease cost-of-living pressures effectively.
Following the Republican defeat, Trump will face greater constraints on his domestic agenda, but his economic and trade pressure on foreign partners may not diminish. For Taiwan, bilateral negotiations have produced some progress, but four major challenges remain: uncertainty surrounding tariff measures, a widening trade surplus with the United States, potential demands for additional U.S.-bound investment, and the outstanding implementation of the Agreement on Reciprocal Trade.
Tariff Uncertainty Persists as Eligibility Requirements for Preferential Treatment Require Clarification
Liu identified the first issue as the ongoing uncertainty regarding Section 232 and Section 301 tariff measures. While the United States has announced Section 232 tariffs on selected products, the specific arrangements for semiconductor tariffs remain undefined. Taiwan has obtained duty-free quotas through the Taiwan-U.S. investment memorandum, contingent upon investments in the United States. Nevertheless, the scope of eligible products, the criteria for determining production capacity, and the requirements for sustaining preferential treatment all require additional clarification.
Regarding Section 301 measures, the United States has announced a 10% tariff on Taiwan over forced labor concerns, with the tariff not stacked on certain existing duties. Tariff measures addressing overcapacity have yet to be announced, and Taiwan remains within the scope of the investigation. In addition to monitoring new tariff rates, Taiwan must clarify how individual tariffs will apply and stack, as well as whether existing exemptions and preferential treatment will remain in effect.
Widening U.S. Trade Surplus Could Turn Industrial Complementarity into Political Pressure
Second, Taiwan’s trade surplus with the United States continues to widen, reaching US$147.7 billion in the first eight months of this year and surpassing the total for all of last year. Trump has consistently focused on bilateral trade balances. The growing surplus could therefore give the United States grounds to demand that Taiwan increase purchases, expand investment, and further open its market.
However, the Taiwan-U.S. trade imbalance has distinctive characteristics. Growth in Taiwan’s exports to the United States is driven primarily by U.S. demand for AI, semiconductors, and information and communications technology products. These products support the development of the U.S. technology industry rather than simply displacing American manufacturing. Stronger U.S. technology demand could therefore further increase Taiwan’s exports and bilateral trade surplus. Even greater Taiwanese purchases from the United States may not significantly narrow the imbalance.
If assessed primarily through the trade balance, this highly complementary economic relationship could still become grounds for pressure on Taiwan. Ensuring that the United States fully understands the bilateral division of labor within supply chains and Taiwan’s industrial contributions will be an important priority in future discussions.
U.S. Investment Demands May Increase, Requiring Taiwan to Preserve Its Domestic Industrial Base
Third, whether investment in the United States can continue to meet the Trump administration’s expectations will remain a long-term challenge. Trump not only seeks to reduce imports through tariffs but also uses them to encourage foreign companies to establish production facilities in the United States. The scale of corporate investment, progress in plant construction, and realization of production capacity could all affect tariff treatment. Taiwan-U.S. economic and trade relations are thus gradually moving toward a model in which investment is required to maintain market access.
Even if Taiwanese companies fulfill their existing commitments, the United States may still demand additional investment. As such demands continue to rise, existing commitments may not be sufficient to secure stable trade treatment over the long term. While expanding their international operations, Taiwanese companies must therefore preserve Taiwan’s domestic foundations in R&D, talent, and supply chains. Overseas investment commitments should not constrain the development of domestic industries.
Agreement on Reciprocal Trade Awaits Implementation, Making Institutional Safeguards Increasingly Important
Fourth, implementation of the Taiwan-U.S. Agreement on Reciprocal Trade requires careful management. Although the two sides have signed the agreement, a U.S. Supreme Court ruling has altered the legal basis for the original reciprocal tariffs. Several issues remain unresolved, including whether the agreement must be revised, when it will take effect, how the United States will implement preferential treatment, and whether other tariff measures will affect existing treatment. Taiwan must also complete the necessary domestic review procedures and supporting measures before implementation can proceed.
Liu stated that Taiwan-U.S. economic and trade relations are transitioning from intensive negotiations to long-term implementation. As Taiwan’s exports to the United States become increasingly concentrated, the trade surplus expands, and investment commitments grow, bilateral economic ties will deepen accordingly. This development underscores the necessity for clear, stable, and enforceable institutional safeguards.
The key question for the future is not merely how many additional demands the United States will make, but how Taiwan can translate its economic contributions into reciprocal and enduring cooperation. The success of negotiations should not be measured solely by the amount of investment pledged or the extent of market opening. It should also be assessed by whether Taiwan secures predictable trade conditions and preserves the long-term competitiveness of its industries.
Source: Daniel Liu(November 6, 2026). Four Key Issues in Taiwan-U.S. Economic and Trade Relations. https://money.udn.com/money/story/5629/9860512