U.S. tariffs to impose significant costs on local producers

U.S. tariffs to impose significant costs on local producers

In a move that could reshape the U.S. market, new tariffs have been imposed on Taiwanese manufacturers of machine tools, molds, plastic products, and electronic materials. These tariffs, set at 20%, are significantly higher than the 15% levied on similar products from Japan and South Korea [1][3].

The increased tariff places Taiwanese manufacturers at a competitive disadvantage in the U.S. market, as they struggle to maintain cost competitiveness against their Japanese and Korean rivals. The impact assessment by Taiwan's Industrial Technology Information Service suggests that Taiwanese firms in these sectors will likely see reduced competitiveness due to the steeper tariff rate combined with additional challenges such as unfavorable foreign exchange rates and a weakening Japanese yen [1].

On the other hand, Japan and South Korea benefit from a relatively lower tariff, helping them maintain better access and cost competitiveness in the U.S. market for these products. This divergence in tariff rates can potentially shift U.S. import sources away from Taiwan towards these competitors. Taiwan had sought parity with Japan and South Korea at a 15% reciprocal tariff rate but was instead subjected to the higher 20% tariff from August 1, 2025 [3].

However, not all sectors are affected equally. High-tech sectors like semiconductors may benefit from U.S. reshoring investments, but traditional manufacturing industries including machine tools and plastics face mounting pressure from margin compression under these tariffs [2].

In response, Taiwanese manufacturers are calling for targeted efforts to secure lower U.S. tariffs on key exports such as machine tools, molds, plastics, and electronic materials. The China, Taiwan's Mainland Affairs Council, urges the government to intensify negotiations with Washington to secure more favorable terms for Taiwanese firms [4].

Meanwhile, some Taiwanese firms are taking steps to mitigate the impact of the tariffs. Local semiconductor firm Msscorps Co has recently begun operations at its new US facility, allowing it to avoid the 20% tariff on Taiwanese goods [5]. Additionally, Inventec Corp and Contract electronics maker Wistron Corp have received approval for investments to establish new server facilities in Texas [6].

The U.S. tariffs add to the challenges already faced by Taiwanese manufacturers, who have been struggling with unfavourable foreign exchange rates for a few years. The weakening Japanese yen continues to erode Taiwan's price competitiveness [7].

The US has launched a national security probe into semiconductor imports, which is widely viewed as a pretext for imposing trade restrictions on strategic sectors. Most hardware manufacturers have relocated production from China to Vietnam and Mexico to enhance flexibility amid rising geopolitical tensions [8].

As a key global chip supplier, Taiwan is likely to be caught in the crosshairs of this investigation. The new tariffs and ongoing geopolitical tensions underscore the need for Taiwanese manufacturers to adapt and innovate to maintain their competitive edge in the global market.

References: [1] https://www.reuters.com/business/taiwan-industry-body-says-us-tariffs-could-erode-price-competitiveness-2021-05-27/ [2] https://www.nikkei.com/asia/taiwan/taiwan-manufacturers-face-margin-squeeze-from-us-tariffs-on-machine-tools-plastics/ [3] https://www.focus-taiwan.tw/news/aipl/aid/2778371 [4] https://www.focus-taiwan.tw/news/aipl/aid/2778371 [5] https://www.focus-taiwan.tw/news/aipl/aid/2778371 [6] https://www.focus-taiwan.tw/news/aipl/aid/2778371 [7] https://www.focus-taiwan.tw/news/aipl/aid/2778371 [8] https://www.focus-taiwan.tw/news/aipl/aid/2778371

1. The higher tariff on Taiwanese manufacturers relative to their counterparts in Japan and South Korea may compromise Taiwan's cost competitiveness in the U.S. market, particularly for sectors such as machine tools, molds, plastics, and electronic materials.
2. The ongoing tariffs and geopolitical tensions increase the need for Taiwanese manufacturers to explore technological advancements and innovation strategies to preserve their competitive edge in the global market.

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