Caught between two fractious superpowers, Taiwan and its world-leading semiconductor industry might be bracing for a year of geopolitical tempest.
For now, though, the main headwinds are coming from within.
As one of the key flashpoints in US-China relations, Taiwan is experiencing uncertainty over Donald Trump’s return to the White House this month.
Unlike his predecessor, Trump has been reluctant to commit to defending Taiwan in the event of any Chinese invasion. He’s accused it of taking the chip business away from the US, and suggested that the democratic archipelago should pay the US for protection.
Trump has threatened 60% tariffs on China, but an escalation of the trade war is likely to impact Taiwan’s export-oriented economy. As home to the world’s most advanced chipmakers, Taiwan has enjoyed robust growth thanks to the artificial intelligence boom.
Officials argue that further US technology curbs on China may even benefit Taiwan as more production would shift back to the islands.
Taiwan’s central bank has suggested that President Lai Ching-te’s government could buy more energy, agricultural products and military goods from the US — a position that seems to align with Trump’s rhetoric.
As Beijing ramps up its pressure with military drills and daily incursions, Taiwan has proposed a record military budget for 2025. However, the spending plan has faced some resistance from opposition parties.
Lai’s Democratic Progressive Party retained the presidency in the 2024 election but lost its legislative majority to the Beijing-friendly Kuomintang and its ally, the Taiwan People’s Party.
Those parties have already passed laws aimed at obstructing Lai’s agenda, complicating his ability to govern at a time of mounting challenges.
Taiwan lives under constant Chinese threats. It knows that the US under Trump will be a fickle ally.
But for Lai, domestic tensions are the most immediate headache.
