Taiwan’s ‘Historic’ TSMC Deal, A Win Or The End Of Its ‘Silicon Shield’ As China Threatens? A Jittery Taiwan Watches Trump’s Moves On Ukraine, Wondering, Could We Be Next?

Taiwan Semiconductor Manufacturing Company, TSMC, the crown jewel of the global semiconductor industry, has just inked what its CEO, CC Wei, calls the biggest foreign direct investment in US history, a staggering $100 billion expansion on American soil. The announcement, made with a beaming Wei standing alongside former US President Donald Trump at the White House, hails a major deal in the world’s chip supply chain. But back in Taiwan, it has sparked a debate that goes far beyond business – could this deal erode Taiwan’s strategic leverage against China?

TSMC’s American Bet

For TSMC, the motivation behind this deal is clear. Trump has been vocal about imposing steep tariffs on global chipmakers if they don’t manufacture in the US. Hence, by expanding its footprint in America, TSMC ensures that it stays in the good books of a protectionist US government while tapping into growing American demand for advanced semiconductors.

For Washington, the deal is a massive win. The US has been striving to bring semiconductor manufacturing back home to reduce dependence on Taiwan, especially as tensions with China escalate. If Beijing ever follows through on its threats to annex Taiwan, the global chip supply essential for everything from smartphones to AI would be in jeopardy and a stronger US semiconductor presence mitigates that risk.

And yet, while the deal has been celebrated in Washington, in Taipei, it has raised alarm bells.

Taiwan’s ‘Silicon Shield’ at Risk?

Taiwan’s dominance in semiconductor manufacturing, particularly through TSMC, has long been viewed as a “silicon shield”. A geopolitical trump card that makes Taiwan too important for the world to abandon with 15% of Taiwan’s GDP tied to the chip industry, nations that rely on TSMC’s cutting-edge semiconductors have a vested interest in ensuring Taiwan remains independent and secure.

But what happens if TSMC shifts too much of its production overseas?

Critics, particularly from Taiwan’s opposition argue that the more chips TSMC produces in the US, the less incentive Washington has to defend Taiwan in the future. As KMT legislator Ko Ju-Chun bluntly put it:

“The more TSMC produces in the US, the lower Taiwan’s geopolitical importance will be.”

If Taiwan loses its exclusive hold over the world’s most advanced semiconductors, will the West still see it as worth defending? That’s the question keeping many in Taiwan up at night.

A ‘Historic Moment’ or a Risky Gamble?

President Lai Ching-te has tried to ease concerns, insisting that Taiwan’s interests will be protected. The government has yet to approve the deal; Taiwanese law requires state approval for any foreign investment over $1.5 billion, a mere fraction of this deal’s size. Lai’s administration has promised to review the investment carefully to ensure it doesn’t compromise Taiwan’s security.

Yet, at the very same White House event, TSMC’s Wei and Trump sent conflicting signals. Wei declared that the deal meant “the most advanced chips will be made on US soil,” while Trump boldly announced that “the most powerful AI chips in the world will be made right here in America.”

Thus, if TSMC is supposed to keep its cutting-edge technology in Taiwan, how does that statement hold up?

Adding to the confusion, Taiwan’s economic affairs ministry has struggled to define exactly what “most advanced” means. With TSMC’s two-nanometer chips (its most sophisticated yet) already scheduled for production in the US, some worry that Taiwan’s technological lead may not be as secure as officials claim.

Trump, Ukraine, and Taiwan’s Jitters

Compounding Taiwan’s concerns is Donald Trump’s increasingly lukewarm stance on Taiwan’s defense. While Trump was once a vocal critic of China, he has hinted at scaling back US support for Taiwan, especially as he shifts focus toward cutting aid to Ukraine. If Trump is willing to walk away from Ukraine, what guarantees does Taiwan have?

China has not missed this opportunity to escalate its rhetoric. With Beijing vowing to take Taiwan by force if necessary, any sign of diminishing Western commitment could embolden China further.

A Jittery Taiwan Watches Trump’s Moves on Ukraine, Wondering – Could We Be Next?

For Taiwan, the abrupt shift in Trump’s stance on Ukraine has sent ripples of anxiety across the island. If Washington can scale back its support for Ukraine, could Taiwan be next in line to face a recalibration of U.S. commitments? That’s the question now dominating discussions among Taiwanese policymakers and analysts.

Taiwan has long banked on its deep strategic partnership with the United States, trusting that America’s security umbrella would shield it from Beijing’s ambitions. But Trump’s apparent willingness to dial down U.S. aid for Ukraine – a nation actively defending itself against an invasion – has injected an unsettling sense of unpredictability into Taiwan’s security calculus.

Russell Hsiao of the Global Taiwan Institute put it bluntly: “If the U.S. can shift its stance on Ukraine, there’s nothing stopping them from doing the same with Taiwan. For an island facing an existential threat from China, that’s deeply alarming.”

The “Porcupine Strategy” and Taiwan’s Military Readiness

In recent years, Taiwan has been trying to fortify its own defenses in anticipation of a possible Chinese military move. The government has embraced what defense analysts call the “porcupine strategy” — making itself so militarily tough and economically vital that an invasion would be too costly for Beijing.

But Taiwan’s current military budget, while significant at around 2.5% of GDP, pales in comparison to China’s, which is now set to cross the $250 billion mark. Trump’s allies, like Elbridge Colby, have called for Taiwan to quadruple its defense spending, pushing it to at least 10% of GDP. While such an increase is politically and economically challenging, President Lai Ching-te has already proposed a hike to over 3% in an attempt to preempt further pressure from Washington.

Yet, there’s a growing concern that increased military spending alone won’t be enough. China’s strategy isn’t limited to military force; it also involves economic coercion, cyberattacks, and disinformation campaigns aimed at destabilizing Taiwan from within. Given Trump’s transactional approach to foreign policy where alliances are often framed in terms of financial contributions. Taiwanese leaders fear they may need to constantly prove their value to retain U.S. support.

The Shadow of 2016

Trump’s track record on Taiwan has been far from predictable. When he first took office in 2016, he broke diplomatic precedent by speaking directly with then-President Tsai Ing-wen, infuriating Beijing. But over time, his administration largely adhered to the longstanding “One China” policy while continuing arms sales to Taiwan.

With his return to the White House, the island is again bracing for uncertainty. Will Trump double down on his past rhetoric and support Taiwan aggressively? Or will he, as with Ukraine, start questioning whether defending the island is worth the cost? His apparent disengagement from traditional alliances has left many in Taipei wary.

For now, Taiwan’s leadership is scrambling to reassure both its domestic audience and its allies abroad. President Lai has emphasized that Taiwan remains committed to its partnership with the U.S., but his administration has stopped short of directly addressing the elephant in the room: What happens if Trump decides Taiwan is no longer America’s problem?

Beijing watches closely as Taiwan faces Trump’s unpredictability

While Taiwan may have secured a significant economic win with the semiconductor deal, it remains wary of the broader geopolitical developments, particularly as Beijing escalates its military posturing. China has long viewed Taiwan as a breakaway province that must eventually be reunited with the mainland by force if necessary. Xi Jinping’s administration has closely monitored how Trump handles international conflicts, particularly his abrupt pivot on Ukraine, and is likely recalibrating its strategy toward Taiwan accordingly.

“Beijing has always assessed U.S. commitments to Taiwan through the lens of broader American foreign policy,” said Bonnie Glaser, managing director of the Indo-Pacific Program at the German Marshall Fund. “If Trump’s approach to Ukraine signals a transactional, rather than principled, commitment to allies, China may see an opening to further test Taiwan’s defenses.”

Already, signs of increased pressure are visible. Over the past month, Chinese warplanes and naval vessels have ramped up their presence in the Taiwan Strait, conducting near-daily incursions into Taiwan’s Air Defense Identification Zone (ADIZ). Experts say these moves are not just about military intimidation but also serve as a litmus test for Washington’s resolve.

Yet, Taiwan is not entirely without leverage. The island’s central role in global semiconductor supply chains makes it indispensable to U.S. national security interests. The Biden administration had previously pursued a strategy of “strategic clarity,” maintaining robust support for Taiwan without directly provoking Beijing. Trump, however, has embraced a more unpredictable stance, at times offering strong rhetorical support while also pressuring Taiwan to shoulder more of the financial burden for its own defense.

That uncertainty has Taiwan’s leadership walking a fine line. While it seeks to bolster military preparedness, it must also manage its relationship with Trump, ensuring that U.S. support remains steadfast even as the administration’s broader foreign policy shifts.

For now, all eyes are on whether Trump’s transactional approach to alliances extends to Taiwan and how Beijing might exploit any perceived weaknesses.