Taiwan may pay high cost for shifting economy from China

China has long been Taiwan’s most important trading partner, the main buyer of its exports and the place where many of its companies make their products. China is also Taiwan's greatest threat and claims that the island democracy is part of its territory.

- MEAGHAN TOBIN AMY CHANG CHIEN XINYUN WU

Now, Taiwan’s ruling political party says it wants to do more to dismantle the commercial ties that for decades have propelled Taiwan’s economic growth.

President Lai Ching-te is calling for companies that make semiconductors — Taiwan’s main industry — to stop buying from and selling to China. Mr Lai has said Taiwanese firms, which make the majority of the world’s advanced computer chips, should instead embrace a supply chain that involves only companies from democratic countries.

Last month, Taiwan’s government told Taiwanese businesses that they would need licenses to sell products to two of China's most important tech companies: telecommunications giant Huawei and SMIC, formally the Semiconductor Manufacturing International Corp. Both are key to China's drive to make its own chips.

The move aligns with Washington’s long-running goal of cutting off China's access to advanced chips. It also underscores how Taiwan is snared between the two superpowers. President Donald Trump is threatening to impose tariffs on Taiwan, and dozens of other US trading partners, as soon as this week.

COUPLING CUTS BOTH WAYS

Taiwan's ruling party wants to be seen in Washington as a reliable friend of the United States, “even if that means paying a short-term economic cost,” said Kharis Templeman, a research fellow at the Hoover Institution, a think tank at Stanford University.

But Taiwan could pay a high cost for shifting its economy away from China.