The News
Taiwanese semiconductor stocks plunged after Republican presidential candidate Donald Trump said Taiwan should pay the US for its defense, arguing that Washington operates as an “insurance company” for the island.
Shares in the Taiwan Semiconductor Manufacturing Company (TSMC) dropped 2.4% after the former US president’s comments to Bloomberg Businessweek.
SIGNALS
Trump argues US gets ‘nothing’ in exchange from Taiwan
Trump told Bloomberg that “Taiwan doesn’t give us anything,” arguing that the US doesn’t benefit from its defense relationship with the island. But Taiwan imports nearly all of its weapons from the US through a foreign purchase program, making it one of the largest buyers of American-manufactured weapons, the Financial Times reported. Trump’s comments raise questions about Washington’s continued commitment to defend Taiwan: US President Joe Biden has repeatedly affirmed that America would intervene in the event of a military threat from China, which views Taiwan as a breakaway province, but Trump has said it would be “difficult” to protect Taiwan from Beijing.
Taipei responds by touting its own self-defense strategy
In response to Trump’s comments, Taiwanese Premier Cho Jung-tai touted the island’s preparedness to defend itself, pointing on Wednesday to its increased military spending and the extension of its military conscription program. Trump has repeatedly questioned whether Washington should defend the island, and while policies enacted during his presidency brought Taipei and Washington closer together, it’s probable that the Republican candidate sees the island as something of a “bargaining chip in negotiations with China,” one analyst told Bloomberg.