[Trump II] - Taiwan and Trump 2.0: Partner or Bargaining Chip?

Donald Trump left a strong and favorable impression on Taiwan. During his first mandate, by taking on Chinese mercantilism through tariffs and restrictions on technology transfers, he enabled the Taiwanese government to achieve a goal it had pursued for nearly twenty years, regardless of the ruling party: diversifying Taiwanese investments beyond China to other countries in the region, and encouraging the return of some businesses to the island. The most striking example of this shift, which no previous Taiwanese public policy had accomplished, is to be found in the server industry, largely dominated by Taiwanese companies. Before Trump’s tariffs, this industry was concentrated in China; since then, it has redirected its focus to Taiwan.

The memory of the Trump administration is also positive in terms of defense and recognition of Taiwan’s dignity on the international stage. The U.S. administration reinstated a posture of strong deterrence in the Taiwan Strait. Arms sales reached $18 billion over four years, compared to $14 billion during the eight years of the Obama administration. The annual review process for requests from Taiwan’s Ministry of Defense was replaced by a rolling approval system, which greatly streamlined defense cooperation between the two sides.

On the diplomatic front, President Trump signed in March 2018 the Taiwan Travel Act, which put an end to several restrictions limiting official exchanges since the 1979 diplomatic break-up. This law allows US government officials at all levels to travel to Taiwan to meet their Taiwanese counterparts and authorizes senior Taiwanese officials to enter the United States under respectful conditions.

But it had all begun in an atmosphere of anxiety and drama. When the president-elect tweeted on 3 December 2016, even before taking office, "The President of Taiwan CALLED ME today to wish me congratulations on winning the Presidency. Thank you!", Taiwanese officials were concerned about the motives behind this highly unusual infringement of protocol. The term "President of Taiwan" is normally never used, and phone exchanges between the presidents in Taipei and the White House, although known to occur, are usually kept confidential. Taiwan's initial reaction: Was Trump trying to increase Taiwan’s "value" to better leverage it in negotiations with China?

Despite the Republicans' seriousness about security in Asia and the favorable impression left by the first Trump administration, there are several reasons to be extremely cautious about the continuity of Taiwan policy during his second term with the economic, diplomatic and military approaches that marked his first term.

First, there is the future of Ukraine. The US administration could impose a territorial compromise leading Ukraine to lose almost 20% of its sovereign territory. Then the signal sent to the expansionist powers would be that conquest pays off if they are able to ensure military control on the ground, protected by nuclear blackmail. Although the Republicans are seeking to convince their interlocutors that the first Trump administration maintained peace in Europe and Asia through credible deterrence, a new narrative focused on the rewards of imperialist aggression could gain traction worldwide. This could overshadow the vision of a peacemaking presidency, particularly in the longer term if Russia exploits the situation to prepare its next offensive. If this is the case, what conclusions will the Chinese and Taiwanese leaders draw? What will the Taiwanese public opinion think?

Then there are the economic issues. There are two main concerns in Taiwan.

On one hand, the campaign announcement of a universal 60% tariff on all Chinese imports to the United States prompted some serious reflection. Yet, as elsewhere, there seems to be little clarity about the potential impact such a measure-if implemented-would have on the restructuring of international trade. This decision could certainly accelerate the ongoing shift away from Taiwanese companies’ dependence on China. But it’s hard to gauge the strength of the ripple effects, or who the winners and losers would be, from a measure that would affect the entire world. Additionally, the Taiwanese haven’t forgotten that U.S. tariffs under the first Trump administration were always conceived as leverage to facilitate the parallel pursuit of an agreement with China.The book by Robert Lighthizer, the architect of this policy as US Trade Representative in the first Trump administration, is enlightening in this respect. The Republicans' obsession at the time was to rebuild a trade relationship with China based on reciprocity and serving American industrial interests, not to destroy everything. Hence the inevitable anxiety, which is bound to resurface today, about a ‘deal’ in which Taiwan would be part of, not as negotiator but as a form of compensation.

The TSMC plant in Arizona, whose installation was initiated by the Trump administration, is benefiting from federal aid. That was Trump's approach, but considering it has been finalized by Biden, would the US President seek to renegotiate the contract on terms less favorable to TSMC? How much pressure can we expect on Taiwan's defense effort? The island's military spending currently stands at 2.45% of GDP (or $20 billion), but voices in the Republican camp have called for 5% and even 10% of GDP.

Beyond the outrageousness and temptation for a great bargain that characterize the man, the key players in the National Security Council, the Pentagon and the economic policy team will play a decisive role in Trump's China policy - perhaps an even more decisive role than that of the President on many important policy issues. For Taiwan, it seems clear that its status as a liberal democracy will have little strategic value in the eyes of the US executive, and that it will be necessary to pay some form of ‘protection fee’. In recent years, Taiwan has given European democracies a fine lesson in lucidity, by detecting the seriousness of the COVID pandemic before anyone else. It is entirely possible that the island will succeed to ensure not only its survival but also its continued prosperity through tactical maneuvers that embrace America First's priorities in terms of industrial employment, rebalancing of economic relations with China, seeking of technological supremacy and increase of the credibility of its defense posture.

Copyright image : Sam Yeh / AFP

President Lai Ching-te in front of an Air Force F-16 aircraft at Hualien Air Base, May 28, 2024.