The direct impact of the extraordinary, “Liberation Day” US tariff regime is bad for Taiwan. The indirect effects may prove to be graphically worse.

Direct impact

Taiwan is America’s primary ally — and paramount geopolitical asset — in the South China Sea. Nevertheless, the initial US tariff imposed on Taiwan on 2 April comprised the new, 10% universal baseline tariff plus a “reciprocal tariff” creating a steep total tariff of 32%.

Next, as America’s chaotic “ tariff tantrum” unfolded, the White House soon announced, after the US stock and bond markets had up-ended themselves, that the additional “reciprocal tariffs” were being paused for 90 days for a range of jurisdictions — including Taiwan — “to allow for trade negotiations”.

The US is Taiwan’s largest export destination accounting for more than 25% of its exports, which include hi-tech equipment, automotive parts and petrochemicals. Taiwan’s governing Democratic Progressive Party, led by President Lai Ching-te, has taken a softly-softly approach in responding, wary of upsetting its assumed primary protector. Many in Taiwan are more concerned than ever about “the challenges and uncertainty ahead".

President Trump’s bottom-line view of Taiwan is also far from sunny. According to The Guardian:

Trump has suggested that Taiwan, like European Nato countries, is exploiting the US security umbrella and not paying enough for its own defence and he has criticised Taipei for supposedly monopolising the semi-conductor market at the expense of US jobs_._

One influential American view, quoted by the Rand Corporation, is that Taiwan’s defence spending, at 2.45% of GDP, is far too low and that it should be “more like 10%, or at least something in that ballpark”.

Indirect impact

The Trump tariffs have notoriously battered both allies and adversaries alike, not least dismaying Japan and South Korea, for example.

In the case of Australia, this anarchic new American tariff initiative has left a very bad taste.

With each fresh military snap of the Washington finger, from AUKUS, to new US base arrangements and force placements, to still more military spending in the US, Australia has been reverentially accommodating, every time.

But this all counted for nothing.

Twice since “Liberation Day”, Canberra has described the US tariff impact as “not the act of a friend”, most recently when the White House ramped up the tariff on imported steel and aluminium from Australia to 50% from 25%.

Soon after, came further cross words. Trump’s overbearing Pentagon chief, Pete Hegseth, sternly argued at the Shangri La Dialogue in Singapore that Australia needed to ramp up its defence spending to 3.5% of GDP (from 2%). Prime Minister Abalone unsmilingly responded that “Australia will determine its own defence policy”.

And, according to the ABC’s chief business correspondent, Ian Verrender, even more economically scary for Australia is the new American tax-bashing scheme aimed at trading partners who disobey White House commands. This latest nasty, geopolitical arm-twister is built into Trump’s luridly controversial, “Big Beautiful (Tax) Bill.”

It will allow the US to impose serious additional income tax on offshore US stock and bond investors deemed to have failed to comply with future White House switchback economic thinking. Sharply in focus, according to Verrender, is how these new US taxes could be used to compel an unwinding of recent moves: by the Australian Government to make American online giants pay for Australian news content; and by the Australian Tax Office to extract a level of increased (though still low) tax from US multinationals winning big profits in Australia.

The Economist describes this brazen coercion as,”a new lever to squeeze foreigners for cash”.

Conclusion

The Australian Strategic Policy Institute reminded us, in June, how Pete Hegseth, told the recent Shangri La meeting in Singapore that:

America would go to war to stop China invading Taiwan. The Trump administration’s military policy is to pivot from Europe to Asia, to deter China’s threat and thwart Beijing’s quest for regional supremacy. ‘President Trump has said that Communist China will not invade Taiwan on his watch. Our goal is to prevent war. And we will do this with a strong shield of deterrence… But if deterrence fails, we will be prepared to do what the Department of Defence does best — fight and win — decisively.’ The US’ three overriding defence objectives, he said, were to ‘restore the warrior ethos, rebuild our military, and re-establish deterrence’.

However, in Taiwan, the number who believe the US would intervene to help Taiwan in a conflict with Beijing has, today, slipped to 37.5% while those retaining a positive view of the US has dropped to 20.8%.

Looking at Washington’s behaviour from Taipei, it is not hard to see why gloomy figures like these are emerging. After more than 70 years of living with cross-strait tensions, the Taiwanese are far more realistic than warrior-adulating Americans. Trump’s ill-tempered disposition towards the island simply confirms why pragmatic realism makes the best sense.

Incredibly, Hegseth went on to argue the need, in Singapore, for even greater arm-twisting of allies to support his articulated possible hot showdown with China over Taiwan. When Hegseth tells us that “America First does not mean America alone” this is meant to intimidate – not reassure. He promised “uncomfortable and tough conversations” to ensure that allies shared the security burden.

And when Hegseth talks up the need for still more defence spending, whether in Australia, Japan, South Korea or elsewhere, the drover’s dog can see he is talking up_, major increases in American weaponry sales to boost the US economy_.

Trump, Hegseth and the rest of the Hillbilly White House refuse to recognise how they are viewed globally and why this matters. But Damian Cave at The New York Times nailed the bottom line fallout from Washington’s worldwide tariff intimidation and continuous hyper-bullying: “Trump [has] supercharged distrust, driving US allies away.”

Sober minds in Taiwan can see how it follows that bruised, primary allies like Australia, Japan and South Korea are now measurably less likely than ever to step forward with meaningful military support, if the Trump administration were to swagger into any sort of provoked, hot conflict with Beijing over Taiwan in the near-to-medium term. Moreover, those same minds can also see how Trump is more likely than most to use Taiwan as a bargaining chip in seeking US advantage, during hardboiled, transactional trade negotiations with Beijing.

The former Singaporean Foreign Minister, George Yeo, drawing on earlier related commentary from Lee Kuan Yew, has provided continuing, deeply informed commentary on why some form of long-term, negotiated settlement between Taiwan and Mainland China is necessary, most recently explaining why Taiwan must eventually negotiate with China. Yeo never downplays the severe difficulties involved, observing how stressful it is for the DPP, especially, to move towards a settled accommodation with Beijing, while also highlighting Beijing’s heavy responsibility to act constructively and in good faith.

One pivotal point repeatedly stressed by Yeo is that postponing steely negotiations is ultimately bad for Taiwan. Its negotiating position is growing weaker over time – not stronger. Thus, to secure the best long-term autonomy for Taiwan, within some form of “Chinese commonwealth”, Taiwan plainly needs to begin negotiating now rather than later. Taiwan’s grim experience during the first several months of the second Trump administration has starkly confirmed Yeo’s astute argument.

The views expressed in this article may or may not reflect those of Pearls and Irritations.