Taiwan gains tariff edge, but US Section 301 pressure is far from over, experts say

The United States has given Taiwan comparatively favorable treatment under its latest Section 301 tariffs, but a separate probe into structural excess capacity could still expose Taiwanese manufacturers — particularly mature-node chipmakers — to further duties.

A preferential rate with strings attached

The Trump administration’s latest tariff action has offered Taiwan a rare measure of relief even as Washington expands the reach of US trade pressure.

On July 24, Washington imposed Section 301 duties on imports from 60 economies over what it described as failures to prohibit and effectively enforce bans on goods made with forced labor.

For Taiwan, the combined most-favored-nation (MFN) and Section 301 tariff rate is capped at 10%, meaning the new duty does not stack on top of the existing MFN rate.

By contrast, Japan and South Korea face a 12.5% combined ceiling, while China and most other covered economies face an additional 12.5% Section 301 duty.

The distinction is consequential. Among the economies subject to the action, Taiwan and the European Union are the only ones whose combined MFN and Section 301 tariff rate is capped at 10%.

The measure also contains a substantial exemption list: 2,231 Taiwanese products, including 322 agricultural and 1,909 industrial items, are excluded from the new Section 301 duty and remain subject only to their existing MFN rates.

Taiwan's Cabinet, the Executive Yuan, said the preferential treatment would help strengthen the price competitiveness of Taiwanese products in the US market and create opportunities for additional orders.

For traditional manufacturers, the differential could translate into a competitive advantage. Textile and petrochemical companies have welcomed the arrangement, telling local media that it could benefit their industries.

The bigger uncertainty lies ahead

However, the 10% figure does not mark the end of Taiwan’s tariff negotiations with Washington.

A separate Section 301 investigation into structural excess capacity and production in manufacturing remains under way.

The semiconductor industry is among the sectors facing uncertainty. Economist and semiconductor industry analyst Liu Pei-chen (劉佩真) said Taiwan’s advanced-node foundries are generally viewed as less vulnerable because of their strategic importance to the global technology supply chain, while mature-node production could face greater scrutiny.

Chang Chien-yi (張建一), president of the Taiwan Institute of Economic Research (TIER) also warned that the impact could broaden if Washington eventually targets finished products containing chips manufactured outside the United States.

Former Minister of Economic Affairs Wang Mei-hua (王美花) said during a July 25 lecture that the latest tariff moves should be viewed as part of a broader shift in US trade policy.

After the US Supreme Court ruled earlier this year that President Donald Trump had exceeded his statutory authority by invoking the International Emergency Economic Powers Act to impose sweeping tariffs, Trump turned to Section 122 of the Trade Act of 1974 before the Office of the US Trade Representative launched multiple Section 301 investigations, including the probes into forced labor and structural overcapacity.

“The result of the forced-labor Section 301 tariff is not bad for Taiwan,” Wang said, warning that the ongoing overcapacity investigation could nevertheless result in higher tariff rates.

Reshoring — and an unintended geopolitical consequence

Wang stated that Trump’s overarching economic objective remains clear: bringing manufacturing back to the United States.

Taiwan, she noted, has already made substantial commitments in that direction under its trade and investment arrangements with Washington, including US$250 billion in planned private-sector investment and a government-backed financing mechanism designed to support up to US$250 billion in corporate financing. Taiwan has also secured preferential treatment under Section 232 for certain products, reflecting Washington’s desire to preserve access to critical supply chains while encouraging production on American soil.

Wang identified a less-discussed political risk in the forced-labor campaign.

For years, allegations of forced labor were closely associated in Western political discourse with China’s treatment of Uyghurs in Xinjiang, Wang told TCN.

If Washington begins accusing a broad range of countries — including close US allies — of failing to adequately enforce restrictions on forced labor, she said, Beijing could use the comparison to argue that Western governments have forfeited their moral standing to criticize China.

“That,” Wang said, “may not necessarily be good for the United States.”

For Taiwan, the latest Section 301 action offers a competitive reprieve but does not eliminate tariff risks. Its immediate impact may be manageable — and even advantageous in some traditional industries — but uncertainty remains as Washington prepares to conclude its structural excess capacity investigation.