U.S. think tank warns: Tariffs on Taiwan may harm AI development, Taiwanese businessmen have invested more than $300 billion in the U.S.

The AI ​​craze has driven Taiwan's exports to the United States to grow significantly. U.S. think tanks have warned the White House that if tariffs are imposed on Taiwan due to the trade deficit, it may affect the development of U.S. AI. (AP file photo)

[Financial Channel/Comprehensive Report] The U.S. merchandise trade deficit with Taiwan continues to expand, reaching US$146 billion (approximately NT$4.6 trillion) by the end of 2025. The Hudson Institute, a think tank in Washington, predicts that it may increase by another 57% to 65% in 2026, reaching US$241 billion (approximately NT$7.6 trillion). Taiwan may even become the largest source of merchandise trade deficit in the United States. The report calls on the U.S. Congress to pass the Taiwan-U.S. Bilateral Tax Agreement (ADTA) as soon as possible, and warns that if the Trump administration chooses to impose punitive tariffs on Taiwan due to the expansion of the Taiwan-U.S. trade deficit, it may jeopardize U.S. AI development goals.

The Hudson Institute reported that the U.S. Department of Commerce announced in mid-July that Taiwan Semiconductor Manufacturing Company (TSMC) would invest an additional US$100 billion (approximately NT$3.1 trillion) in the United States for advanced semiconductor manufacturing. If you add the US$100 billion announced in March 2025 and the US$65 billion (approximately NT$2.06 trillion) invested in Arizona starting in 2020, TSMC's cumulative foreign direct investment (FDI) quota in the United States has reached at least US$265 billion (approximately NT$8 trillion).

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If the deployment of Taiwanese factories such as Hon Hai, Global Crystal, Quanta and Wistron in the United States is included, the total investment committed by Taiwanese companies in the United States has exceeded US$300 billion (approximately NT$9.5 trillion), exceeding the US$250 billion foreign direct investment and US$250 billion credit guarantee commitments made by my country in the Taiwan-US Investment Agreement in January 2026.

The report points out that direct investment from Taiwan is flowing into the U.S. technology industry on an unprecedented scale. At the same time, due to the huge demand for AI in the United States, the U.S.-Taiwan trade deficit has increased significantly. For Washington, resolving the U.S. trade imbalance is one of the most important priorities for the White House. However, ensuring that the United States maintains its leading position in the field of artificial intelligence is another priority for the White House. If punitive measures are taken against Taiwan due to the trade imbalance, it may cause the United States to deviate from its path of dominance in the field of AI.

In the past two years, nearly 50% of the growth in domestic demand in the United States and most of the gains in the S&P 500 index have been attributed to the AI ​​boom. The strategic importance of U.S. investment in AI is extremely high. Trump once described the AI ​​competition as "the most significant test of our capabilities since the dawn of the space age."

The United States needs to win the AI ​​race, and to do this it cannot do without Taiwan. Taiwan is currently probably the most important economic and strategic partner of the United States. Although balancing the trade deficit is an important goal of the Trump administration, it should not be at the expense of jeopardizing the competitive advantage of U.S. AI development. Therefore, Washington should take appropriate measures to make full use of this important cooperative relationship.

The amount of U.S. imports from Taiwan has increased significantly in recent years. In the past two years, the value of technology and AI-related goods imported by the United States from Taiwan has increased by more than 200%. Semiconductors, servers, smartphones and other electronic and semiconductor-related products have accounted for more than 75% of the total value of U.S. imports from Taiwan.

It is worth noting that the U.S. merchandise trade deficit with Taiwan was US$146 billion at the end of 2025. At that time, Taiwan was the fifth largest source of the U.S. merchandise trade deficit. The Hudson Institute estimates that if the deficit further increases by 57% to 65% in 2026, it may reach US$241 billion for the whole year, and Taiwan may become the trading partner with the largest merchandise trade deficit of the United States by then.

The report believes that this change is closely related to the rapid expansion of the US AI industry. The United States is currently actively building the world's largest AI ecosystem, while Taiwan plays an important role in the advanced semiconductor and server supply chain.

The report cited estimates from the 2023 Project 2049 Institute and the U.S.-Taiwan Business Association that if the United States loses Taiwan's semiconductor industry, it may cause the U.S. economy to lose approximately US$1.6 trillion (approximately NT$50 trillion) per year, equivalent to 8% of GDP. The author of the report further believes that with the rapid growth of AI demand, related losses may now exceed US$2 trillion.

Regarding the future economic and trade relations between the United States and Taiwan, the report puts forward two suggestions. First of all, the U.S. Congress should pass the Taiwan-U.S. Bilateral Tax Agreement (ADTA) as soon as possible because Taiwan is one of the few major economies that has not signed a double taxation treaty (Tax Treaty) with the United States.

As more and more Taiwanese businessmen invest in the United States, the tax agreement will not only reduce the tax burden on Taiwanese and American companies, but also allow funds to be used more for operations and expansion rather than tax expenditures.

Secondly, Taiwan should complete the relevant implementation legislation of the Bilateral Reciprocal Trade Agreement (ART) as soon as possible. The report pointed out that after the implementation of ART, Taiwan will reduce 99% of trade barriers to exports to the United States and further open markets such as agricultural products, aquatic products, poultry, dairy products, medical equipment, and passenger cars.

In addition, Taiwan has also agreed to purchase up to US$85 billion (approximately NT$2.6 trillion) of US energy, power infrastructure, civil aircraft and engines by 2030.

The report finally pointed out that Taiwan may currently be the most important trading partner of the United States. Although the expansion of the trade deficit between Taiwan and the United States may become a problem, it should not affect the United States' goal of building the world's largest and most powerful computing power.

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