Trump Calls for Taiwan to Pay for U.S. Defence, Impacting TSMC Shares

Donald Trump suggested Taiwan should compensate the U.S. for its defence, akin to an insurance model, causing TSMC shares to drop. The U.S., vital to Taiwan's defence, lacks a formal agreement with the island, which faces persistent military activities from China. Taiwan insists on its sovereignty and defence responsibilities.

Republican presidential candidate Donald Trump has suggested that Taiwan should compensate the United States for its defence in a move that has jolted the financial markets. In an interview with Bloomberg Businessweek, Trump likened the U.S. to an insurance company and argued that Taiwan doesn't offer anything substantial in return for U.S. military support. The comments have caused a notable drop in shares of Taiwan Semiconductor Manufacturing Co Ltd (TSMC), a key chipmaker.

Trump's remarks come amid Taiwan's ongoing modernization of its defence capabilities and growing military pressure from China. While the U.S. remains Taiwan's primary international supporter and arms supplier, there is no formal defence agreement, unlike with South Korea and Japan. Taiwan Premier Cho Jung-tai emphasized that Taiwan is committed to its own security and has increasingly boosted its defence budget.

The situation is further complicated by the U.S.'s strategic ambiguity regarding its stance on Taiwan, with President Joe Biden making comments that suggested potential U.S. intervention. TSMC, which is central to the global chip market, faces a delicate balance as it navigates geopolitical tensions and its significant investments in both Taiwan and overseas plants, including a substantial $65 billion investment in Arizona.