President Donald J. Trump addressing the US Congress after the start of his second mandate in 2025. (Source: Public Domain)
As Trump returns to the White House in 2025, the world watches how his second term will reshape U.S. foreign policy. Earlier in February, a proposed minerals deal between Ukraine and the U.S. made headlines. The deal, intended to allocate a portion of revenues from Ukraine’s state-owned natural resources to the U.S. in exchange for continued American support, collapsed following a heated White House meeting. The mineral deal has ignited global debate and raised concerns among U.S. allies.
Now, with growing tensions in the Taiwan Strait, concerns mount over whether Taiwan could face a similar transactional demand. If security guarantees come with a price tag, what might Washington demand from Taipei in the event of a conflict with China? Could Taiwan’s semiconductor dominance be its ultimate bargaining chip for U.S. support?
Money First: Trump’s Transactional Approach to Foreign Policy
It is no secret that Trump has long embraced a highly transactional and money-first approach to foreign policy. A pattern that was evident throughout his first term and has continued into his second. He has often framed alliances and diplomatic relationships in terms of material value. Viewing U.S. commitments as strategic partnerships and deals to be negotiated for tangible returns. The recent mineral trade deal discussed during his meeting with Zelensky in February exemplifies this mindset, tying U.S. security assistance to access to Ukraine’s state-owned natural resources. When Ukraine did not accept the terms of the agreement, the U.S. responded by postponing military aid and intelligence sharing. A bold move that undermines the perceived reliability of U.S. commitments.
U.S. Allies on Edge: What It Means for Taiwan (maybe we could try to avoid a new paragraph for two sentences? Could we include this in one paragraph, either the one above or the one below?)
While foreign policy inherently involves negotiation and bargaining. Trump’s approach often treats alliances as business transactions, where support is contingent on direct material exchange. His remark during negotiations with Ukrainian President Zelenskyy—suggesting that Ukraine “has no card to play to end the conflict” —further underscores this outlook.
The Losing of Silicon Shield? TSMC’s Bold Investment Move
Trump’s handling of the Ukraine minerals deal has raised alarms among U.S. allies, with Taiwan feeling particularly vulnerable. The island’s most valuable geopolitical asset—its semiconductor industry—has long been viewed as a critical bargaining chip for U.S. security guarantees. Often referred to as Taiwan’s “silicon shield,” TSMC’s dominance in advanced chip manufacturing is central to both the island’s economic stability and national security.
Just days after the heated U.S.-Ukraine meeting on February 28, TSMC unexpectedly announced a $100 billion investment to expand its Arizona operations. The deal includes two advanced packaging facilities, three semiconductor foundries, and a research center—one of the company’s largest overseas commitments, after Taiwan’s January decision to lift restrictions on foreign chip production.
For years till January, Taiwan restricted its most advanced semiconductor production to maintain its technological edge. TSMC was only allowed to manufacture overseas chips at least one generation behind those made domestically. For example, it could not produce 2nm chips in the U.S. until Taiwan had already moved on to A-16 chips, projected for mass production in late 2026. Even as TSMC expanded to Japan and Germany, those plants were limited to larger, less advanced nodes to safeguard Taiwan’s leadership in cutting-edge chipmaking.
Now, with restrictions lifted and a major U.S. expansion underway, concerns are mounting in Taiwan. While the investment aligns with Trump’s push for semiconductor self-sufficiency, it raises questions about whether Taiwan is gradually losing its leverage in the U.S.-Taiwan security dynamic.
TSMC, as a private enterprise, has the freedom to make strategic business decisions. However, given its pivotal role in both Taiwan’s economy and national security, its overseas expansion inevitably carries broader geopolitical implications.
Eroding Taiwan’s Strategic Leverage?
Critics argue TSMC’s expansion in the U.S. risks Taiwan’s strategic leverage by transferring key semiconductor technology that was previously safeguarded within domestic production. This “protectionism” ensures Taiwan’s semiconductor industry remains an indispensable asset in global supply chains.
Concerns grow that the U.S. may gradually reduce its dependence on Taiwan. This fear is compounded by Trump’s past rhetoric, as during his 2024 campaign, he accused TSMC of “stealing” the U.S. chip industry.
After the announcement of the investment plan, in an interview with FULLMEASURE, Trump unilaterally claimed that TSMC’s investment would increase to $200 billion—without any official confirmation from the company, and even declared, “Forget about chips from Taiwan.” Such statements have only intensified fears that the U.S. is seeking to diminish Taiwan’s strategic importance.
If Washington becomes self-sufficient, would Taiwan’s semiconductor dominance still hold value as a bargaining chip? In the event of a conflict with China, would Trump, with his transactional foreign policy mindset, be less inclined to defend Taiwan if its strategic importance in the semiconductor supply chain diminishes?
Without U.S.’ security guarantees or commitments, there’s no shield. Janson Hsu, former Taiwan legislator & senior fellow on tech policy at Hudson Institute.
Securing Taiwan Strategic Value: A Necessary Step
Supporters argue Taiwan should not be overly concerned about the deal. The deal is an “insurance policy” for Taiwan’s security—an approach welcomed by Trump. For TSMC, establishing production in the U.S. offers practical business benefits, such as avoiding the risk of tariffs that Trump has frequently threatened to impose on Taiwan-made chips. Furthermore, from a technological perspective, collaboration with the U.S. could foster innovation, allowing TSMC to leverage U.S. expertise in chip design, thereby strengthening Taiwan’s position in the semiconductor supply chain.
Impossible for U.S. to give up Indo Pacific, it’s in the U.S.’ national interest. Wellington Koo, Minister of National Defense.
Building on these benefits, Taiwan remains a crucial strategic asset for the U.S., Koo reassured Taiwan’s security and geopolitical significance in the media briefing after the announcement.
Positioned at the center of the first island chain, Taiwan is a key point for countering any potential Chinese invasion. Protecting Taiwan is vital for U.S. national security and the interests of neighboring U.S. allies. Therefore, Taiwan remains a core interest for the U.S. and will not easily be abandoned. Taiwan, like other U.S. allies, needs and agrees to increase its military spending. The U.S. is unlikely to treat Taiwan in the same way it approaches Ukraine. Given Taiwan’s strategic importance in the broader security framework of the Indo-Pacific region.
Beyond Security… Operational Challenges
Beyond geopolitical concerns, TSMC’s U.S. expansion raises practical challenges. Higher labor costs could put the company at a competitive disadvantage compared to its cost-efficient operations in Taiwan.
Cultural differences in work ethics also pose hurdles—Taiwan’s workforce is known for its efficiency and dedication, often working long hours to meet production demands. In contrast, U.S. labor laws and workplace norms may not align as seamlessly with TSMC’s high-intensity approach. This friction has already led to lawsuits alleging “anti-American discrimination” at the company. If not managed carefully, these operational challenges could undermine the efficiency that has long defined TSMC’s significance in the supply chain.
While Taiwanese authorities have downplayed concerns, insisting that TSMC’s expansion is purely a business decision. Claiming it is a win-win for U.S.- Taiwan- TSMC. Yet the move inevitably signals a deeper shift in Taiwan’s strategic position. Is this a win-win scenario, or will Taiwan ultimately bear the costs? As tensions in the Taiwan Strait continue to escalate, the key question remains: will Taiwan’s semiconductor industry continue to serve as a protective ‘silicon shield,’ or is it at risk of becoming a mere bargaining chip in U.S. foreign policy?
Further Reading:
- China’s Reach Has Grown; So Should The Island Chains. VORNDICK , W. 2018. Asia Maritime Transparency Initiative.
- How the U.S. and Global Semiconductor Industry Might Change During Trump’s Second Term. Ackerman, K. 2024. Sourcengine.
- Global Taiwan Brief. Vol. 8, Issue 15. 2023. Global Taiwan Institute.
- Trump Is Making Taiwan More Vulnerable. David, S. 2025. Council on Foreign Relations.
Think About….
- Is Taiwan’s ‘silicon shield’ still a reliable safeguard, or is it becoming a bargaining chip in U.S. foreign policy?
- From the failed mineral deal with Ukraine to Taiwan’s semiconductor dilemma, is strategic material the only guarantee of U.S. support, or are broader geopolitical factors at play? How do other U.S. allies perceive Washington’s security commitments?
- If conflict erupts, will Taiwan’s strategic value guarantee unwavering U.S. support, or will it be subject to the same transactional approach seen in Ukraine?
