Source: Lawrence Chung, SCMP

Washington reportedly demands that Taiwan match investment commitments made by Japan and South Korea to qualify for 15 per cent tier

Taiwan has temporarily breathed a sigh of relief after learning that its exports to the United States will face a 20 per cent tariff – lower than the initially feared 32 per cent – pending further negotiations for a reduced rate.

But their concerns are far from over, as pressure mounts over whether the island must make sweeping concessions, including a reported US$400 billion investment pledge, to secure a more favourable rate before the 20 per cent tariff takes effect on August 7.

So far, the latest tariff list released by the White House makes no mention of any investment pledge.

Adding to the uncertainty are reports that planned visits to the US by Taiwanese leader William Lai Ching-te and Defence Minister Wellington Koo Li-hsiung were deferred at the last minute.

Analysts said the developments were far from coincidental and might mark a deliberate effort by Washington to dial down Taiwan-related tensions as it sought a breakthrough in trade talks with Beijing.

US President Donald Trump’s “Liberation Day” tariff campaign launched in April aims to impose duties matching those faced by American exporters. While most major trading partners have reached agreements, Taiwan remains among a small group still negotiating its final rate.

Citing reports by foreign news outlets, including Bloomberg, Taiwanese media said on Thursday that Washington was demanding that Taiwan match the investment commitments made by Japan and South Korea – US$550 billion and US$350 billion respectively – to qualify for the 15 per cent tariff tier.

Taiwan is reportedly considering a US$300-400 billion package, equivalent to four years of the island’s central government budget.

In response, Taiwanese cabinet spokeswoman Michelle Lee said that Vice-Premier Cheng Li-chun and the island’s negotiation team remained in Washington for last-minute talks. She said the two sides had reached a consensus on non-tariff barriers, trade facilitation, supply chain resilience and investment cooperation.

“But the final terms are pending the US government’s internal decision process,” she said.

Asked by Taiwan’s TVBS News network whether discussions were nearing completion, US Trade Representative Jamieson Greer declined to comment.

However, the reported commitment by Lai’s administration to invest US$400 billion in exchange for a preferential 15 per cent tariff rate has sparked grave concerns from opposition lawmakers.

“We stand by the government, but if we can’t bear the cost, we must consider reopening talks,” said lawmaker Fu Kun-chi of Taiwan’s main opposition party, the Kuomintang (KMT). He warned that Taiwan’s foreign reserves and fiscal capacity could be depleted.

Fu said Taiwan had spent 90 per cent of its US$580 billion reserves on US Treasury bonds.

“If we commit NT$12 trillion (US$403 billion) in investment and already have NT$18 trillion locked in US Treasuries, what’s left for Taiwan?” he said.

KMT legislator Lai Shyh-bao voiced even stronger objections, likening the negotiations to “the unequal Treaty of Shimonoseki” and warning that the proposed investment would allow the US to dictate industrial priorities, including car imports and market liberalisation for American pork and beef.

“One-third of our cars would come from the US, and we’re expected to fully open to American agricultural products. Are we giving away everything?” he asked.

The Treaty of Shimonoseki, also known as the Treaty of Maguan, was signed in 1895 between the Qing dynasty (1644-1911) and imperial Japan, ending the first Sino-Japanese war. It forced China to cede Taiwan, the Penghu Islands, and the Liaodong peninsula to Japan. China was also forced to recognise Korea’s independence, pay a large indemnity, and open more ports for Japanese trade.

KMT lawmaker Chen Yu-jen said the proposal would effectively “spend an entire Lai’s term’s worth of government budget on a single deal”. She questioned whether such a high price was worth the 15 per cent tariff, given that Taiwan had already pledged major chip investments and infrastructure support.

Behind the scenes, concerns are also growing over whether Trump is becoming more cautious about supporting Taiwan in ways that could jeopardise US ties with Beijing.

Several news outlets reported on Monday that the US had blocked Lai from transiting through New York on his way to visit Latin America in early August. This was followed by reports on Wednesday that the US had also called off a June visit by Koo, the island’s defence minister, at the last minute. Koo was reportedly planning to visit Washington for talks with Elbridge Colby, the US undersecretary of defence for policy.

Taiwan’s defence ministry declined to comment on the reports on Thursday, while Lai’s office said on Monday that the island’s leader had “no immediate visit plan”.

Dennis Lu-Chung Weng, an associate professor of political science at Sam Houston State University in Texas, called the two deferral decisions “a signal, not a coincidence”.

“Trump is lowering the political temperature with Taiwan to pave the way for a deal and [leadership] talks with Beijing in the second half of this year,” Weng said on social media on Thursday, noting that a mainland Chinese envoy had already acknowledged the gesture by Washington.

“In the Trump era, Taiwan must not be naive. This is transactional diplomacy,” he said.

But lawmakers from Lai’s ruling Democratic Progressive Party (DPP) saw it differently.

“Bipartisan US support for Taiwan remains strong across government, Congress, and think tanks,” DPP legislator Chiu Chih-wei said.

The lawmaker said the long-standing trust between Taiwan and the US would not change and that as long as trust continued to accumulate, Lai’s future US transits would “naturally follow”.

“Currently, Trump’s focus is on tariff negotiations,” he said, adding that Lai’s decision to delay travel due to tariff uncertainty “reflects that mutual trust, and should not be seen as a shift in Taiwan-US relations”.

Chiu added that the biggest variable in Taiwan-US ties “now comes from pro-China, US-sceptical opposition parties at home”.

“These voices complicate Taiwan’s work with the US amid complex trade talks and US-China negotiations.”

Beijing regards Taiwan as part of China and has not ruled out the use of force to bring the island under its control. It has ramped up military pressure since Lai took office last year and sharpened his pro-independence stance.

Like most countries, the United States does not recognise self-ruled Taiwan as an independent state, but it opposes any unilateral change to the cross-strait status quo and is legally obliged under the Taiwan Relations Act to help the island defend itself.