Can Taiwan Sever Its Economic Ties with China?

For decades, China has served as Taiwan’s primary trading partner, representing the largest market for its exports and the site for much of its manufacturing. However, China also poses the most significant geopolitical threat to Taiwan, asserting the island as part of its sovereign territory.

In response, Taiwan’s governing party is now advocating for a strategic reduction in commercial ties that have long underpinned the island’s economic development.

President Lai Ching-te has urged semiconductor manufacturers — the backbone of Taiwan’s economy — to cease both procurement from and sales to Chinese firms. He emphasizes the need for Taiwanese companies, which produce the majority of the world’s advanced chips, to pivot toward supply chains exclusively involving democracies.

Recently, Taiwan’s authorities mandated that domestic companies obtain licenses before conducting business with two major Chinese tech firms: Huawei, a telecommunications leader, and Semiconductor Manufacturing International Corporation (SMIC), both central to China’s ambitions to develop indigenous chipmaking capabilities.

This policy aligns with ongoing efforts from the United States to limit China’s access to cutting-edge semiconductor technology, highlighting Taiwan’s delicate position amid escalating tensions between the global superpowers. Meanwhile, the U.S. has also threatened to impose tariffs affecting Taiwan and numerous other trading partners in the near future.