Taiwanese Think Tank: Section 301 Tariffs Offer Advantage to Traditional Industries, Semiconductor Impact Uncertain

Taiwan's economic outlook under the U.S. Section 301 tariffs appears mixed, with analysts suggesting potential benefits for traditional industries while uncertainties linger for the crucial semiconductor sector. The U.S. Trade Representative's office has imposed tariffs on 60 economies, with Taiwan facing a 10% rate. Taiwan Institute of Economic Research (TIER) president Chang Chien-yi stated that this 10% tariff is "relatively advantageous" for Taiwan, especially for its traditional manufacturing industries. This rate is lower than the 12.5% applied to competitors such as Japan and China, potentially giving Taiwanese companies a competitive edge in the U.S. market.

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The 301 clause is relatively advantageous for Taiwan, especially for traditional industries because the applicable tax rate of 10% is lower than that of competitors like Japan and China at 12.5%.

Chang explained that the broad scope of the 301 tariffs, which focus on issues like forced labor and overcapacity, is being implemented in phases rather than all at once. He noted that the market has largely adapted to former President Trump's tariff policies. While traditional sectors might benefit, the impact on Taiwan's high-tech industries, particularly semiconductors, is still under scrutiny. The U.S. is expected to release findings on overcapacity investigations by the end of July, which will clarify the specific tariffs and scope applicable to semiconductors.

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The market has gradually adapted to the tariff policies of U.S. President Trump, and the 301 investigation is not implemented all at once but in batches targeting different industries.

Liu Pei-chen, director of TIER's industrial economics database, further differentiated between advanced and mature semiconductor manufacturing processes. She believes the 301 investigation primarily targets overcapacity in mature processes and will have minimal impact on Taiwan's advanced chip production. Advanced processes are more likely to be affected by Section 232 national security investigations. Liu added that many Taiwanese second-tier foundries have already shifted away from competing with China's "red supply chain" on price, focusing instead on niche markets and AI applications to mitigate potential impacts from the 301 tariffs.

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The 301 investigation mainly affects mature processes; advanced processes are still related to the Section 232 national security investigation, and the 301 clause has almost no impact on advanced processes.

Liu also pointed out that if Taiwan can negotiate favorable treatment with the U.S., the impact of the 301 tariffs on its mature semiconductor sector could be further reduced. The market is keenly awaiting the U.S. announcement on semiconductor-related investigations, with the end of July anticipated as a key period for understanding the implications of U.S. tariff policies on Taiwan's industries. The broader implications of the 301 tariffs, potentially extending to digital taxes and China's shipbuilding industry, necessitate ongoing observation of future developments.

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If Taiwan and the U.S. can subsequently negotiate more favorable treatment, the impact of the 301 clause on Taiwan's mature process manufacturers can be further reduced.