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U.S. Republican presidential candidate Donald Trump said Taiwan should pay the United States for its defense as it does not give the country anything, sending shares of Taiwanese chip manufacturer TSMC down on Wednesday.
“I know the people very well and 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 with Bloomberg Businessweek on June 25, published on Tuesday. “You know, we’re no different than an insurance company. Taiwan doesn’t give us anything.”
Impact on TSMC and the Global Chip Industry:
TSMC is the dominant maker of advanced chips used in everything from AI applications to smartphones and fighter jets, and analysts believe any conflict over Taiwan would decimate the world economy.
Taiwan Premier Cho Jung-tai, responding to Trump’s comments, said Taiwan and the U.S. have good relations despite the lack of formal ties and are dedicated to bolstering its defenses.
“Taiwan has steadily strengthened its defense budget and demonstrated its responsibility to the international community,” he said at a routine news conference in Taipei. “We are willing to take on more responsibility; we are defending ourselves and ensuring our security.”
U.S. Support and Strategic Ambiguity:
The U.S. is Taiwan’s most important international supporter and arms supplier, but no formal defense agreement exists.
However, the U.S. is legally bound to provide Taiwan with the means to defend itself. Taiwan’s government has prioritized defense modernization, including developing its own submarines, and has said many times that the island’s security rests in its own hands.
Chinese Military Activity and U.S. Relations:
Taiwan, which China views as its territory, has complained of repeated Chinese military activity over the past four years as Beijing seeks to pressure the democratically governed island, which rejects China’s sovereignty claims.
U.S. President Joe Biden has upset the Chinese govt with comments that appeared to suggest the U.S. would defend Taiwan if it were attacked, a deviation from a long-held U.S. position of “strategic ambiguity.” Washington and Taipei have had no official diplomatic or military relationship since 1979, when the U.S. switched recognition to Beijing and terminated a mutual defense treaty.
TSMC did not immediately react. It is in a quiet period ahead of its second-quarter earnings report on Thursday.
