Bussiness

‘Taiwan should pay us for defence’, Donald Trump says

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5 months ago

July 17, 2024

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‘Taiwan should pay us for defence’, Donald Trump says

Taiwan should pay the United States for its defence as it does not give the country anything, US Republican presidential candidate Donald Trump said, sending shares of Taiwanese chip manufacturer TSMC down on Wednesday.

“I know the people very well, respect them greatly. They did take about 100 per cent of our chip business. I think, Taiwan should pay us for defence,” Trump said in interview on June 25 but published on Tuesday.

“You know, we’re no different than an insurance company. Taiwan doesn’t give us anything.”

TSMC is the dominant maker of advanced chips used in everything from AI applications to smartphones and fighter jets, and analyst believe any conflict over Taiwan would decimate the world economy.

The US is Taiwan’s most important international supporter and arms supplier, but there is no formal defence agreement. The US is however bound by law to provide Taiwan with the means to defend itself.

The logo of Taiwan Semiconductor Manufacturing Company’s (TSMC) is seen at the opening of the chip maker’s global R&D centre in Hsinchu, Taiwan, last year. Photo: Reuters

Taiwan has complained of repeated Chinese military activity over the past four years as Beijing seeks to pressure the democratically governed island. Beijing sees Taiwan as part of its territory to be reunited by force if necessary. Most countries, including the US, do not recognise Taiwan as an independent state, but Washington is opposed to any attempt to take the self-governed island by force.

US President Joe Biden has upset Beijing with comments that appeared to suggest the US would defend Taiwan if it were attacked, a deviation from a long-held US position of “strategic ambiguity”.

Washington and Taipei have had no official diplomatic or military relationship since 1979, when the US switched recognition to Beijing.

Cho Jung-tai, Taiwan’s premier, said on Wednesday that the island was willing to take on more responsibility for defending itself and is steadily increasing defence spending. There was no immediate reaction from Taiwan Semiconductor Manufacturing Co Ltd, which is currently in its quiet period ahead of its second quarter earnings report on Thursday.

Shares in TSMC, the world’s largest contract chip maker and a major Apple and Nvidia supplier, fell more than 2 per cent on Wednesday morning. The broader market was down around 0.4 per cent.

A TSMC factory is seen under construction in Phoenix, Arizona, in 2022. Full-scale operations at the plant were planned to begin this year. Photo: Kyodo

TSMC is spending billions building new factories overseas, including US$65 billion on three plants in the US state of Arizona, though it says most manufacturing will remain in Taiwan.

Taiwan also has a backlog worth some US$19 billion of arms deliveries from the United States, which US officials and politicians have repeatedly pledged to speed up.

In April, the US Congress had passed a sweeping foreign aid package which includes arms support for the island, after House Republican leaders abruptly switched course and allowed a vote on the US$95 billion in mostly military aid for Ukraine, Israel and Taiwan and US partners in the Indo-Pacific.

03:11

Mainland China launches PLA blockade around Taiwan, 3 days after William Lai speech

Beijing held two days of war games around the island shortly after Taiwanese leader Lai Ching-te took office in May, saying it was “punishment” for his inauguration speech, which it denounced as being full of separatist content.

But Beijing has also been using grey zone warfare against Taiwan, wielding irregular tactics to exhaust a foe by keeping them continually on alert without resorting to open combat. This includes sending balloons over the island and almost daily air force missions into the skies near Taiwan.