Taiwan Paid the Highest Price in Trump's Tariff War — and Got Nothing in Return

When a U.S. court invalidated the legal basis for President Donald Trump's universal 10% import tariff last Thursday, most affected economies had reason to exhale. Taiwan did not. Despite appearing on paper to benefit from the ruling, Taiwan is the only economy that has emerged from this tariff war having surrendered more than it will ever recover.

Trump's trade offensive has rested on two successive statutory pillars — both of which have now collapsed in court. When his administration launched its sweeping "reciprocal tariffs" on trading partners in April last year, it invoked the International Emergency Economic Powers Act (IEEPA), a broad executive authority that allows the president to impose trade restrictions — including tariffs and import controls — upon declaring a national emergency. In practice, IEEPA functioned as an open-ended license for unilateral action, with the White House free to define the terms of any emergency it chose. Courts rejected that reading. In February, the Supreme Court struck down the tariffs as exceeding the authority the law actually conferred.

Trump pivoted quickly. He turned to Section 122 of the Trade Act, which allows the president — without congressional approval — to impose a temporary surcharge of up to 15% on all imports when confronted with serious balance-of-payments imbalances or sharp dollar depreciation, for a period not normally exceeding 150 days. Under that authority, Trump imposed the 10% across-the-board tariff that replaced his reciprocal regime. On Thursday, the U.S. Court of International Trade struck that down too.

Some analysts have argued the practical consequences are limited: no nationwide injunction was issued, and the tariff was already due to expire in July. That framing understates the significance. American companies that had already filed legal challenges against the administration's tariff measures can now cite this ruling as binding precedent. The government's ability to sustain the 10% levy against other importers has been materially weakened.

None of this means trading partners can declare victory. Trump has called tariffs "the most beautiful word in the dictionary," and he has no intention of abandoning them. With IEEPA and Section 122 both invalidated, the administration's next tool is Section 301 of the Trade Act — the same authority Trump used when he launched his trade war against China in 2018. Section 301 was not deployed during last year's reciprocal tariff round, not because it lacked force, but because it imposes more procedural requirements and does not permit the same degree of immediate, unilateral action. It will now almost certainly become the primary vehicle for the next round. No economy should assume it has escaped.

Here is the paradox at the heart of this story: for the vast majority of trading partners, Trump's two courtroom defeats have produced a net gain. During the reciprocal tariff phase, most major economies faced rates well above 10% — many between 15% and 50%. When those tariffs were struck down and replaced with the uniform 10% levy under Section 122, nearly every country benefited from the rate reduction. Only the United Kingdom and Singapore, which had already secured the 10% floor rate, saw no improvement. Now that Section 122 has also been invalidated, tariff levels for most countries should revert toward pre-trade-war norms — at least until the next round begins under Section 301.

But four economies are clearly worse off: the European Union, Japan, South Korea, and Taiwan. All four, in their negotiations with Washington, agreed to massive financial commitments — hundreds of billions of dollars in U.S. investment and procurement — in exchange for lower tariff rates. With those rates now rendered legally void, the concessions they made to secure them have bought nothing. Countries such as Indonesia and Vietnam, which pledged comparatively modest sums in the tens of billions, have far less cause for regret.

Among the four, Taiwan's exposure is the most severe. Taipei committed to NT$500 billion in U.S. investment and NT$84 billion in purchases of American energy products. Measured against the size of Taiwan's economy and population, no comparable economy gave up more per capita. And the financial pledges were only part of the cost.

Taiwan was effectively compelled to accelerate the transfer of its most strategically sensitive industrial asset. Taiwan Semiconductor Manufacturing Company (TSMC) was pressured into increasing its U.S. investment commitment by an additional $100 billion. Beyond semiconductors, Taiwan surrendered sovereign authority over agricultural import standards — including food safety thresholds and quarantine regulations — agreeing to adopt American norms wholesale. The consequences are already becoming apparent. Recent controversies over U.S. potato and peanut imports have offered an early preview of the disruption these concessions are beginning to produce, with implications that extend from the farming sector to public health.

The Lai Ching-te (賴清德) administration declared these negotiations a "home run" for Taiwan — a characterization increasingly difficult to defend. Taiwan gave up more than any comparable economy across financial commitments, industrial concessions, and regulatory autonomy, in exchange for tariff relief that has since been declared legally invalid. While the European Union and other parties have quietly slowed the implementation of their trade pledges, Taiwan has publicly doubled down on its own, citing mutual sincerity and momentum.

In a tariff war that has left most of the world better positioned than when it started, Taiwan stands as the one economy that lost comprehensively — on every dimension that matters.

Original Article in Chinese

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