Category: Economy

Source: Republic of China Taiwan

In a recent interview with Japan’s Nikkei, President Lai Ching-te responded to questions regarding Taiwan-Japan and Taiwan-United States relations, cross-strait relations, the semiconductor industry, and the international economic and trade landscape. The interview was published by Nikkei on May 13.
President Lai indicated that Nikkei, Inc. is a global news organization that has received significant recognition both domestically and internationally, and that he is deeply honored to be interviewed by Nikkei and grateful for their invitation. The president said that he would like to take this rare opportunity to thank Japan’s government, National Diet, society, and public for their longstanding support for Taiwan. Noting that current Prime Minister Ishiba Shigeru and former Prime Ministers Abe Shinzo, Suga Yoshihide, and Kishida Fumio have all strongly supported Taiwan, he said that the peoples of Taiwan and Japan also have a deep mutual affection, and that through the interview, he hopes to enhance the bilateral relationship between Taiwan and Japan, deepen the affection between our peoples, and foster more future cooperation to promote prosperity and development in both countries.
Following is the text of the questions and the president’s responses:
Nikkei: What is your personal view regarding the free trade system and the recent tariff war?
President Lai: Over the past few decades, the free economy headed by the Western world and led by the US has brought economic prosperity and political stability to Taiwan and Japan. At the same time, we have also learned or followed many Western values.
I believe that Taiwan and Japan are exemplary students, but some countries are not. Therefore, the biggest crisis right now is China, which exploits the free trade system to engage in plagiarism and counterfeiting, infringe on intellectual property rights, and even provide massive government subsidies that facilitate the dumping of low-priced goods worldwide, which has a major impact on many countries including Japan and Taiwan. If this kind of unfair trade is not resolved, the stable societies and economic prosperity we have painstakingly built over decades, as well as some of the values we pursue, could be destroyed. I therefore think it is worthwhile for us to observe the recent willingness of the US to address unfair trade, and if necessary, offer assistance.
Our national strategic plan for Taiwanese industries is for them to be rooted in Taiwan while expanding their global presence and marketing worldwide. Therefore, while the 32 percent tariff increase imposed by the US on Taiwan is indeed a major challenge, we are willing to address it seriously and find opportunities within that challenge, making Taiwan’s strategic plan for industry even more comprehensive.
Nikkei: What is your view on Taiwan’s trade arrangements?
President Lai: In 2010 China accounted for 83.8 percent of Taiwan’s outbound investment, but last year it accounted for only 7.5 percent. In 2020, 43.9 percent of Taiwan’s exports went to China, but that figure dropped to 31.7 percent in 2024. We have systematically transferred investments from Taiwanese enterprises to Japan, Southeast Asia, Europe, and the US. Therefore, last year Taiwan’s largest outbound investment was in the US, accounting for roughly 40 percent of the total. Nevertheless, only 23.4 percent of Taiwanese products were sold to the US, with 76.6 percent sold to places other than the US. 
In other words, we don’t want to put all our eggs in one basket, and hope to establish a global presence. Under these circumstances, Taiwan is very eager to cooperate with Japan. At this moment, the Indo-Pacific and international community really need Japan’s leadership, especially to make the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) excel in its functions. We also ask Japan to support Taiwan’s CPTPP accession.
Taiwan hopes to sign an Economic Partnership Agreement (EPA) with Japan, to build closer ties in economic trade and promote further investment. We also hope to strengthen relations with the European Union, and even other regions. Currently, we are proposing an initiative on global semiconductor supply chain partnerships for democracies, because the semiconductor industry is an ecosystem. For example, Japan has materials, equipment, and technology; the US has IC design and marketing; Taiwan has production and manufacturing; and the Netherlands excels in equipment. We therefore hope to leverage Taiwan’s advantages in production and manufacturing to connect the democratic community and establish a global non-red supply chain for semiconductors, ensuring further world prosperity and development in the future, and ensuring that free trade can continue to function without being affected by dumping, which would undermine future prosperity and development.
We want industries to expand their global presence and market internationally while staying rooted here in Taiwan. Having industries rooted in Taiwan involves promoting pay raises for employees, tax cuts, and deregulation, as well as promoting enterprise investment tax credits. We have also proposed Three Major Programs for Investing in Taiwan for Taiwanese enterprises. We are actively resolving issues regarding access to water, electricity, land, human resources, and professional talent so that the business community can return to Taiwan to invest, or enterprises in Taiwan can increase their investments. We are also actively signing bilateral investment agreements with friends and allies so that when our companies invest and expand their presence abroad, their rights and interests as investors are ensured. 
Additionally, as I just mentioned, we hope to sign an EPA with Japan, similar to the Taiwan-US Initiative on 21st-Century Trade and the Economic Prosperity Partnership Dialogue, or the Enhanced Trade Partnership arrangement with the United Kingdom, or similar agreements or memorandums of understanding with Canada and Australia that allow Taiwanese products to be marketed worldwide. Those are our overall arrangements.
Looking at the history of Taiwan’s industrial development, of course it began in Taiwan, and then moved west to China and south to Southeast Asia. We hope to take this opportunity to strengthen cooperation with Japan to the north, across the Pacific Ocean to the east, and develop the North American market, making Taiwan’s industries even stronger. In other words, while we see the current reciprocal tariffs imposed by the US as a kind of challenge, we also view these changes positively.
Nikkei: Due to pressure from China, it is difficult for Taiwan to participate in international frameworks such as the CPTPP or sign an EPA with Japan. What is your view on this situation?
President Lai: The key point is what kind of attitude we should adopt in viewing China’s acts of oppression. If we act based on our belief in free trade, or on the universal values we pursue – democracy, freedom, and respect for human rights – and also on the understanding that a bilateral trade agreement between Taiwan and Japan would contribute to the economic prosperity and development of both countries, or that Taiwan’s accession to the CPTPP would benefit progress and prosperity in the Indo-Pacific region, then I personally hope that our friends and allies will strongly support us.
Nikkei: Regarding the Trump administration’s “reciprocal tariff” policy and the possibility of taxing semiconductors, how do you interpret their intentions? How does Taiwan plan to respond?
President Lai: Since President Trump took office, I have paid close attention to interviews with both him and his staff. Several of his main intentions are: First, he wants to address the US fiscal situation. For example, while the US GDP is about US$29 trillion annually, its national debt stands at US$36 trillion, which is roughly 124 percent of GDP. Second, annual government spending exceeds US$6.5 trillion, but revenues are only around US$4.5 trillion, resulting in a nearly US$2 trillion deficit each year, about 7 percent of GDP. Third, the US pays nearly US$1.2 trillion in interest annually, which exceeds the US$1 trillion defense budget and accounts for more than 3 percent of GDP. Fourth, he still wants to implement tax cuts, aiming to reduce taxes for 85 percent of Americans. This would cost between US$500 billion and US$1 trillion. These points illustrate his first goal: solving the fiscal problem.
Second, the US feels the threat of China and believes that reindustrialization is essential. Without reindustrialization, the US risks a growing gap in industrial capacity compared to China. Third, in this era of global smart technology, President Trump wants to lead the nation to become a world center of AI. Fourth, he aims to ensure world peace and prevent future wars. So, if you ask me what the US seeks to achieve, I would say these four areas form the core of its intentions. That is why President Trump has raised tariffs, demanded that trading partners purchase more American goods, and encouraged friendly and allied nations to invest in the US, all in order to achieve these goals.
The 32 percent reciprocal tariff poses a critical challenge for Taiwan, and we must treat it seriously. Our approach is not confrontation, but negotiation to reduce tariffs. We have also agreed to measures such as procurement, investment, resolving non-tariff trade barriers, and addressing origin washing in order to effectively reduce the trade deficit between Taiwan and the US. Of course, through this negotiation process, we also hope to turn challenges into opportunities. First, we aim to start negotiations from the proposal of zero tariffs and seek to establish a bilateral trade agreement with the US. Second, we hope to support US reindustrialization and its aim to become a world AI hub through investment, while simultaneously upgrading and transforming Taiwan’s industries. This would help further integrate Taiwan’s industries into the US economic structure, ensuring Taiwan’s long-term development. 
As I have repeatedly emphasized, Taiwan’s national industrial strategy is for industries to stay firmly rooted in Taiwan while expanding their global presence and marketing worldwide. We have gone from moving westward across the Taiwan Strait, to shifting southbound, to working closer northward with Japan, and now the time is ripe for us to expand eastward by investing in North America. In other words, while we take this challenge seriously to protect national interests and ensure that no industry is sacrificed, we also hope these negotiations will lead to deeper Taiwan-US trade relations through Taiwanese investment in the US. These are our expectations.
Naturally, the reciprocal tariffs imposed by the US will have an impact on Taiwanese industries. In response, the Taiwanese government has already proposed support measures for affected industries totaling NT$93 billion. In addition, we have outlined broader needs for Taiwan’s long-term development, which will be covered by a special budget proposal of NT$410 billion. This has already been approved by the Executive Yuan and will be submitted to the Legislative Yuan for review. This special budget proposal addresses four main areas: supporting industries, stabilizing employment, protecting people’s livelihoods, and enhancing resilience.
As for tariffs on semiconductors, Taiwan Semiconductor Manufacturing Company (TSMC) has committed to investing in the US at the request of its customers. I believe TSMC’s industry chain will follow suit. These are concrete actions that are unrelated to tariffs. However, if the US were to invoke Section 232 and impose tariffs on semiconductors or related industries, it would discourage Taiwanese semiconductor and ICT investments in the US. We will make this position clear to the US going forward.
Among Taiwan’s exports to the US, there are two main categories: ICT products and electronic components, which together account for 65.4 percent. These are essential to the US, unlike final goods such as cups, tables, or mattresses. What Taiwan sells to the US are the technological products required by AI designers like NVIDIA, AMD, Amazon, Google, and Apple. Therefore, we will make sure the US understands clearly that we are not exporting end products, but the high-tech components necessary for the US to reindustrialize and become a global AI center. Furthermore, Taiwan is also willing to increase its defense budget and military procurement. We are committed to defending ourselves and are strongly willing to cooperate with friends and allies to ensure regional peace and stability. This is also something President Trump hopes to see.
Nikkei: Could TSMC’s fabs overseas weaken Taiwan’s strategic position as a key hub for semiconductor manufacturing? And could that then give other countries fewer incentives to protect Taiwan?
President Lai: Political leaders around the world including Japan’s Prime Minister Ishiba and former Prime Ministers Abe, Suga, and Kishida have emphasized, at the G7 and other major international fora, that peace and stability in the Taiwan Strait are essential for global security and prosperity. In other words, the international community cares about Taiwan and supports peace and stability in the Taiwan Strait because Taiwan is located in the first island chain in the Indo-Pacific, directly facing China. If Taiwan is not protected, China’s expansionist ambitions will certainly grow, which would impact the current rules-based international order. Thus, the international community willingly cares about Taiwan and supports stability in the Taiwan Strait. That is the reason, and it has no direct connection with TSMC. After all, TSMC has not made investments in that many countries. That point, I think, is clear. 
TSMC’s investments in Japan, Europe, and the US are all natural, normal economic and investment activities. Taiwan is a democratic country whose society is based on the rule of law, so when Taiwanese companies need to invest around the world for business needs, the government will support those investments in principle so long as they do not harm national interests.
After TSMC Chairman C.C. Wei (魏哲家) held a press conference with President Trump to announce the investment in the US, he returned to Taiwan to hold a press conference with me here at the Presidential Office, where he explained to the Taiwanese public that TSMC’s R&D center will remain in Taiwan and that the facilities it has already committed to investing in here will not change and will not be affected. So, to put it another way, TSMC will not be weakened by its investment in the US. I want to emphasize this once more: Taiwan has strengths in semiconductor manufacturing, and Taiwan is very willing to work alongside other democratic countries to promote the next stage of global prosperity and development.
Nikkei: It feels as though we are returning to what was previously called the Cold War, with two opposing blocs – East and West – facing off again. Between the US and China, which side should we choose?
President Lai: Some experts and scholars describe the current situation as entering a new Cold War era between democratic and authoritarian camps. Others assert that the war has already begun, including information warfare, economic and trade wars, and the ongoing wars in Europe – the Russo-Ukrainian War – and the Middle East, and the Israel-Hamas conflict. These are all matters experts have cautioned about. I am not a historian, so I will not attempt to define today’s political situation from an academic standpoint. However, I believe that every country has a choice. That is to say, Taiwan, Japan, or any other nation does not necessarily have to choose between the US and China. What we are deciding is whether our country will maintain a democratic constitutional system or regress into an authoritarian regime. This is essentially a choice of values – not merely a choice between two major powers.
Taiwan’s situation is different from other countries because we face a direct threat from China. We have experienced military conflicts such as the August 23 Artillery Battle and the Battle of Guningtou – actual wars between the Republic of China and the People’s Republic of China. China’s ambition to annex Taiwan has never wavered. Today, China’s political and military intimidation, as well as internal united front infiltration, are growing increasingly intense. Therefore, to defend democracy and sovereignty, protect our free and democratic system, and ensure the safety of our people’s lives and property, Taiwan’s choice is clear.
China’s military exercises are not limited to the Taiwan Strait, and include the East China Sea, South China Sea, and even the Sea of Japan, as well as areas around Korea and Australia. Taiwan, Japan, Australia, and the Philippines are all democratic nations. Taiwan’s choice is clear, and I believe Japan also has no other choice. We are all democratic countries whose people have long pursued the universal values of democracy, freedom, and respect for human rights. That is what is most important.
Nikkei: As tensions between the US and China intensify, what roles can Taiwan and Japan play?
President Lai: In my view, Japan is a powerful nation. I sincerely hope that Japan can take a leading role amid these changes in the international landscape. I believe that countries in the Indo-Pacific region are also willing to respond. I think there are several areas where we can work together: first, democracy and peace; second, innovation and prosperity; and third, justice and sustainability.
In the face of authoritarian threats, we should let peace be our beacon and democracy our compass as we respond to the challenges posed by authoritarian states. Second, as the world enters an era characterized by the comprehensive adoption of smart technologies, Japan and Taiwan should collaborate in the field of innovation to further drive regional prosperity and development. Third is justice and sustainability. Because international society still has many issues that need to be resolved, Taiwan and Japan can cooperate for the public good, helping countries in need around the world, and cooperating to address climate change and achieve net-zero transition by 2050.
Nikkei: Do you hope that the US will continue to be a leader in the liberal democratic system?
President Lai: Although the US severed diplomatic ties with the Republic of China, for the past few decades it has assisted Taiwan in various areas such as national defense, security, and countering threats from China, based on the Taiwan Relations Act and the Six Assurances. Taiwan has also benefited, directly and indirectly, in terms of politics, democracy, and economic prosperity thanks to the US. Therefore, Taiwan naturally hopes that the US remains strong and continues to lead the world.
When the US encounters difficulties, whether financial difficulties, reindustrialization issues, or becoming a global center for AI, and hopes to receive support from its friends and allies to jointly safeguard regional peace and stability, Taiwan is willing to stand together for a common cause. If the US remains strong, that helps Taiwan, the Indo-Pacific region, and the world as a whole.
The vital role of the US on the global stage has not changed. However, after decades of shouldering global responsibilities, it has encountered some issues. Now, it has to make adjustments, and I firmly believe it will do so swiftly, and quickly resume its leadership role in the world.
Nikkei: I remember you said during your election campaign that you would like to invite China’s President Xi Jinping for bubble tea. Have you changed your mind?
President Lai: Taiwan is a peace-loving country, and Taiwanese society is inherently kind. Therefore, we hope to get along peacefully with China, living in peace and mutual prosperity. So, during my term as vice president, I was expressing the goodwill of Taiwanese society. Of course, I understand that China’s President Xi would have certain difficulties in accepting this. However, I must emphasize that the goodwill of Taiwanese society has always existed. If China reflects on the past two or three decades, it will see that its economy was able to develop with Taiwan as its largest foreign investor. Every year, 1 to 2 million Taiwanese were starting businesses or investing in China, creating numerous job opportunities and stabilizing Chinese society. While many Taiwanese businesses have profited, Chinese society has benefited even more. In addition, every time a natural disaster occurs, if China is in need, Taiwanese always offer donations. Therefore, I hope that China can face the reality of the Republic of China’s existence, and understand that the people of Taiwan hope to continue living free and democratic lives with respect for human rights. I also hope China can pay attention to the goodwill of Taiwanese society. We have not abandoned the notion that as long as there is parity, dignity, exchange, and cooperation, the goodwill of choosing dialogue over confrontation and exchange over containment will always exist.
Nikkei: What is your view on the national security reforms in response to China’s espionage activities and infiltration attempts?
President Lai: China’s united front infiltration activities in Taiwan are indeed very serious. China’s ambitions to annex Taiwan rely not only on the use of political and military intimidation, but also on its long-term united front and infiltration activities in Taiwanese society. Recently, the Taiwan High Prosecutors Office of the Ministry of Justice prosecuted 64 spies, which is three times the number in 2021. In addition to active-duty military personnel, many retired military personnel were also indicted. Moreover, Taiwan also has the Chinese Unification Promotion Party, which has a background in organized crime, Rehabilitation Alliance Party, which was established by retired military personnel, and Republic of China Taiwan Military Government, which is also composed of retired generals. These are all China’s front organizations, and they plan one day to engage in collaboration within Taiwan. This shows the seriousness of China’s infiltration in Taiwan. Therefore, in the recent past I convened a high-level national security meeting and proposed 17 response strategies across five areas. The five areas include the following: first, to address China’s threat to Taiwan’s sovereignty; second, to respond to the threat of China’s obscuring the Taiwanese people’s sense of national identity; third, to respond to the threat of China’s infiltrating and recruiting members of the ROC Armed Forces as spies; fourth, to respond to the threat of China’s infiltration of Taiwanese society through societal exchanges and united front work; and fifth, to respond to the threat of China using “integration plans” to draw Taiwan’s young people and Taiwanese businesses into its united front activities. In response to these five major threats, I have proposed 17 response strategies. One of which is to restore the military trial system. If active-duty military personnel commit military crimes, they must be subject to military trials. This expresses the Taiwanese government’s determination to respond to China’s united front infiltration and the subversion of Taiwan.
Nikkei: What actions can Taiwan take to guard against China’s threats to regional security? 
President Lai: Many people are worried that the increasingly tense situation may lead to accidental conflict and the outbreak of war. My view is that Taiwan is committed to facing China’s various threats with caution. Taiwan is never the source of these problems. If there is an accidental conflict and it turns into a full-scale war, it will certainly be a deliberate act by China by using an accidental conflict as a pretext. When China expanded its military presence in the East China Sea and South China Sea, the international community did not stop it; when China conducted exercises in the Taiwan Strait, the international community did not take strong measures to prevent this from happening. Now, China is conducting gray-zone exercises, which are aggressions against not only the Taiwan Strait, the South China Sea, and the East China Sea, but also extending to the Sea of Japan and waters near South Korea. At this moment, Taiwan, the Philippines, Japan, and even the US should face these developments candidly and seriously. We must exhibit unity and cooperation to prevent China’s gray-zone aggression from continuing to expand and prevent China from shifting from a military exercise to combat. If no action is taken now, the situation may become increasingly serious.
Nikkei: Some US analysts point out that China will have the ability to invade Taiwan around 2027. How do you assess the risk of a Chinese invasion at this stage?
President Lai: As the country on the receiving end of threats and aggression, Taiwan must plan for the worst and make the best preparations. Our armed forces have a famous saying: “Do not count on the enemy not showing up; count on being ready should it strike.” This is why I proposed the Four Pillars of Peace action plan. First, we must strengthen our national defense. Second, we must strengthen economic resilience. Not only must our economy remain strong, but it must also be resilient. We cannot put all our eggs in the same basket, in China, as we have done in the past. Third, we must stand shoulder to shoulder with friends and allies such as Japan and the US, as well as the democratic community, and we must demonstrate the strength of deterrence to prevent China from making the wrong judgment. Fourth, I would like to emphasize again that as long as China treats Taiwan with parity and dignity, Taiwan is willing to conduct exchanges and cooperate with China and seek cross-strait peace and mutual prosperity through exchanges and cooperation.
Nikkei: Amid intensifying US-China confrontation, in which areas do you think Taiwan and Japan should strengthen cooperation? In addition, Japan’s Ishiba administration is also a minority government. What are your expectations for the Ishiba administration?
President Lai: In the face of rapid and tremendous changes in the political situation, every government faces considerable challenges, especially for minority governments. But the Japanese government led by Prime Minister Ishiba has quite adequately responded with various strategies. Furthermore, Japan is different from Taiwan. Although Japan’s ruling party lacks a majority, political parties in Japan engage in competition domestically while exhibiting unity externally. Taiwan’s situation is more challenging, because the ruling and opposition parties hold different views on the direction of the country, due to differences in national identity.
In the future, I hope that Taiwan and Japan will enjoy even more comprehensive cooperation. I have always believed that deep historical bonds connect Taiwan and Japan. Over the past several decades, when encountering natural disasters and tragedies, our two nations have assisted each other with mutual care and support. The affection between the people of Taiwan and Japan is like that of a family. In addition, both countries face the threat of authoritarianism. We share a mission to safeguard universal values such as democracy, freedom, and respect for human rights. Our two countries should be more open to cooperation in various areas to maintain regional peace and stability as well as to strengthen cooperation in economic and industrial development, such as for semiconductor industry chains and everyday applications of AI, including robots and drones. We can also cooperate on climate change response, such as in hydrogen energy and other strategies. Our two countries should also continue to strengthen people-to-people exchanges. I would like to take this opportunity to once again invite our good friends from Japan to visit Taiwan for tourism and learn more about Taiwan. The Taiwanese people wholeheartedly welcome our Japanese friends.
 

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