Blending economic nationalism with geopolitical leverage, US President Donald Trump’s top trade official delivered a pointed message to Taiwan shortly after Washington announced an ambitious deal on Thursday to bring critical technology manufacturing, including semiconductors, back to the United States.
US Commerce Secretary Howard Lutnick framed the massive reshoring initiative as not just a business transaction, but as a strategic imperative for Taiwan to maintain favour with the “America first” leader.
The agreement commits Taiwan companies to as much as US$500 billion in semiconductor, energy and AI investments in the US, including at least US$250 billion in direct spending and a further US$250 billion in credit guarantees to support supply chains and industrial clusters.
“They need to keep our president happy, right? Because our president is the key to protecting [Taiwan],” Lutnick said in an interview with American business news outlet CNBC.
Describing the agreement as a “gigantic commitment to onshoring in America”, he added, “why would they do this?”
“And the answer is because Donald Trump is vital to protecting them. And so they want to keep our president happy, right?” Lutnick said.
Beijing views Taiwan as a part of China to be reunited, by force if necessary. Most countries, including the US, do not recognise the island as an independent state, but Washington is opposed to any attempt to take the self-governed island by force and is committed to supplying it with weapons.
In a statement shared with the South China Morning Post on Thursday, China’s embassy in Washington “strongly deplored” what it called a “so-called agreement”, calling on Washington to “revoke” the deal.
Spokesman Liu Pengyu accused the US of “deliberately” advancing talks, saying the move “gravely violates” the one-China principle and the three China-US joint communiques, and contravenes Washington’s pledge to maintain only unofficial ties with Taiwan.
He urged the US to “stop pushing forward and revoke at once the so-called agreement, and stop sending wrong signals to ‘Taiwan independence’ separatist forces, otherwise all consequences shall be borne by the US side”.
The US views Taiwan’s semiconductor dominance, led by the Taiwan Semiconductor Manufacturing Company, which makes over 90 per cent of the world’s most advanced chips, as a national security vulnerability, not just an economic asset.
Washington worries this dependence creates a single point of failure. Taiwan’s chip plants are concentrated just 130 to 160 kilometres from mainland China, leaving them exposed to conflict, blockade, natural disasters or coercion.
Any disruption could cripple US military systems, critical infrastructure and the broader economy, as advanced chips underpin AI, telecommunications and defence.
Many in Taiwan, however, see this dominance as a “silicon shield” that keeps the US motivated towards the island’s security against forceful reunification with the mainland.
Since returning to the office in January, Trump has repeatedly threatened sweeping tariffs against Taiwan if its companies refuse to move their manufacturing to the US, accusing the island of stealing American chip industry unfairly.
The US share of global wafer fabrication has plummeted from 37 per cent in 1990 to under 10 per cent by 2024.
On Thursday, Lutnick said that “the objective is to bring 40 per cent of Taiwan’s entire supply chain and production into ... America”.
He shared that the goal was to be achieved during Trump’s ongoing term that is scheduled to conclude in January 2029.
Lutnick added that “these people have committed to try to build this full infrastructure and do it now in America” and if the promise is not kept, “the tariff is likely to be 100 per cent”.
The carrot-and-stick approach extends to broader trade terms, capping US “reciprocal” tariffs on Taiwan goods at 15 per cent, with zero tariffs on generics, pharmaceuticals, aircraft components and certain resources.
Beijing vehemently objects to the recent US-Taiwan semiconductor investment deal, viewing it as a provocation.
Chinese officials, including the Taiwan Affairs Office, accuse Taiwan’s ruling Democratic Progressive Party of “selling out” its semiconductor industry to win favour with Washington, portraying the onshoring push as a political trade-off rather than a genuine economic partnership.
Beijing sees such engagements, including official trade pacts and tariff frameworks that reward US-bound investments, as direct interference in its “internal affairs”.
Amid escalating tensions over US arms sales, training support and transactional rhetoric from the Trump administration, China has intensified military pressure through large-scale drills.
In December 2025, the People’s Liberation Army conducted the “Justice Mission 2025” exercises that encircled Taiwan, simulated blockades, fired rockets into nearby waters, and rehearsed isolating the island while countering potential US intervention.
However, Lutnick on Thursday ruled out any impact on US-China relations, stressing Trump’s “great personal relationship” with President Xi Jinping.
The two leaders met in October last year in Busan, South Korea, where Washington agreed to lower some tariffs on Chinese imports and Beijing agreed to remove certain export restrictions on rare earths and critical minerals.
Taiwan was not discussed during the summit, however a phone conversation shortly after that, Xi emphasised Taiwan’s return to China as “an integral part of the post-war international order”.
In the past few months since meeting Xi, Trump has expressed his intentions to visit mainland China in April to meet his Chinese counterpart.
Lutnick on Thursday said that despite recent developments, the US president still plans to make the trip. -- SOUTH CHINA MORNING POST
